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14-35 Simulation The auditors of SSC Company, a nonpublic company, are working on both audit objectives for the various accounts and documentation requirements. Parts (a)

14-35

Simulation

The auditors of SSC Company, a nonpublic company, are working on both audit objectives for the various accounts and documentation requirements. Parts (a) through (d) of this question relate to objectives, while part (e) addresses documentation.
The auditors have established the objectives listed below as a part of the audit. For each objective, select a substantive procedure (from the list of substantive procedures) that will help achieve that objective. Each of the procedures may be used once, more than once, or not at all.
Audit Objectives
a. Determine the existence of year-end recorded accounts payable and that the client has obligations to pay these liabilities.
b. Establish the completeness of recorded accounts payable .
c. Determine that the presentation and disclosure of accounts payable are appropriate.
d. Determine that the valuation of warranty loss reserves is measured in ccordance with GAAP
Substantive Procedures
I. Obtain a trial balance of payables and reconcile with the accounts payable subsidiary ledger.
2. Vouch sales from throughout the year.
3. Vouch purchases recorded after year-end.
4. Vouch sales recorded shortly before year-end.
5. Vouch major warranty expenses paid during 20X8.
6. Inquire of management concerning the ellistence of related party transactions.
7. Test the computations made by the client to set up the accrual.
8. Test the reasonableness of general and administrative labor rates.
9. Confirm outstanding year-end balances of payables.
10. Confirm warranty expenses payable as of year-end.
Note: Part (e) is possible to work in a meaningful way only if you have the professional standards available preferably in electronic form.

e. The auditors believe that it will be necessary to depan from a requirement relating to accounts payable that is considered presumptively mandatory. Provide the AU-C section and paragraph(s) that address documentation requiremen ts i n this situation. You need only present the requirement, not the application and other explanatory material.

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