Bert Finney, CPA, is the auditor of Raleigh Ltd. Finney is considering the audit work to be performed in the accounts payable area for the current-year engagement. The prior-year documentation shows that confirmation requests were mailed to 100 of Raleighs 1000 suppliers. The selected suppliers were based on Finneys sample that was designed to select accounts with large dollar balances. Finney and Raleigh staff spent a substantial number of hours resolving relatively minor differences between the confirmation replies and Raleighs accounting records. Alternative audit procedures were used for those suppliers who did not respond to the confirmation requests.

Required:

a. Identify the accounts payable audit objectives that Finney must consider in determining the audit procedures to be followed.

b. Identify situations in which Finney should use accounts payable confirmations, and discuss whether he is required to use them.

c. Discuss why the use of large dollar balances as the basis for selecting accounts payable for confirmation might not be the most effective approach, and indicate what more effective procedures could be followed when selecting accounts payable for confirmation.