Jessie and Jones, partners in Jessie and Jones, CPAs, are planning their audit program for the audit of accounts payable on the Smother Corporations annual audit. Saturday afternoon, they reviewed the thick file of last years working papers, and both of them remembered all too well the six days they spent last year on accounts payable.

Last year, Jessie had suggested that they mail confirmations to 100 of Smothers suppliers. The company regularly purchases from about 1,000 suppliers, and these account payable balances fluctuate widely, depending on the volume of purchases and the terms Smothers purchasing agent is able to negotiate. Jessies sample of 100 was designed to include accounts with large balances. In fact, the 100 accounts confirmed last year covered 80% of the total accounts payable.

Both Jessie and Jones spent many hours tracking down minor differences reported in confirmation responses. Non-responding accounts were investigated by comparing Smothers balance with monthly statements received from suppliers. Ultimately, they determined that the accounts payable balance was not materially misstated.

Required:

Identify the accounts payable audit objectives that the auditors must consider in determining the audit procedures to be performed.

Identify situations when the auditors should use accounts payable confirmations and discuss whether they are required to use them.