Question 2

As part of a team of auditors assigned to audit Dandelion Limited, a furniture retailer, for year ended 2020 December 31, you have been asked to verify trade creditors $1 200 000 and accruals $400 000. The company buys items on credit from small furniture manufacturers.

A. State THREE (3) audit procedures that you would use to verify trade creditors and THREE (3) to verify accruals. (14 marks)

B. Explain the importance of a bank letter as part of the procedure of obtaining confirmations from a bank. (6 marks)