Question 4 (6 marks)

Paul Maincin, CPA, is the auditor of Raleigh Corporation. Mincin is considering the audit work to be performed in the accounts payable area for the current year engagement. After obtaining an understanding of Raleighs controls, Mincin assessed control risk at the maximum.

Mancin decided to confirm supplier balances and mailed confirmation requests to 100 of Raleighs 1000 suppliers. The selected suppliers were based on Mancins sample that was designed to select accounts with large dollar balances.

Required:

a) Explain why the use of large dollar balances as the basis for selecting accounts payable for confirmation might not be the most effective approach for the audit of accounts payable. (4 marks)

b) Provide one audit procedure that would be more effective than selectingaccounts payable for confirmation. Explain the purpose of the procedure and why it is more effective (2 marks).