ABC Stores is a large discount catalog department store chain. The company has recently expanded from 8 to 60 stores by borrowing from several large financial institutions and from a public offering of common stock. A recent investigation has disclosed that ABC materially overstated net income. This was accomplished by understating account payable a recording fictitious supplier credits that further reduced accounts payable. An SEC investigation was critical of the evidence gathered by ABC's audit firm, John & Peter, in testing account payable and the supplier credits. The following is a description of some of the fictitious supplier credits and unrecorded amounts in account payable, as well as the audit procedure.

1. Account payable accrual - John & Peters assigned a senior with experience in the retail area to audit account payable. Although ABC had poor internal control, John & Peter selected of 50 for confirmation of the several thousand vendors who did business with ABC. 27 responses were received, and 21 were reconciled to ABC's records. These tests indicated an unrecorded liability of approximately RM290,000 when projected to the population of account payable. However, the investigation disclosed that ABC's president made telephone calls to some suppliers who had received confirmation requests from John & Peter and told them how to respond the request.

Identify deficiencies in the sufficiency and appropriateness of the evidence gathered in the audit of account payable of ABC Stores.(Very exhaustive and interesting explanation on)