Search for Unrecorded Liabilities

An important part of every audit is examining vendors invoices processed after year end. Related to

cutoff, as discussed in Module VI, this set of procedures has the purpose of determining that no

significant invoices pertaining to the year being audited have been omitted from recorded liabilities.

Derick has asked that you examine the document prepared by Cheryl Lucas and entitled Search for

Unrecorded Liabilities, and review it for necessary audit adjustments.

Requirements

1. Retrieve the file labeled 20X9 Liab. (LINK) Comment on the adequacy of the procedures performed

by Lucas.

2. Assuming that you found the following additional unrecorded charges pertaining to 20X9, draft Audit

Adjustment 6 at the bottom of WP 15.1:

a. Sales commissions $366,900

b. Employers payroll taxes: FICA $94,000, state unemployment $126,000

c. Printing and copying $27,800

d. Postage $22,300

e. Office supplies $18,6002

3. Print or Save the document.

ronv & Bikes repared bv: Date: Search for Unrecorded Liabilities December 31, 20X9 Reviewed VENDR DATEAMMOUNT t"*"exPLANATION Crown Manufacturing Bluehil and Gilson Y""$2,v ndirect materials sipped and received inJanuary, 20YO "218/20Y $173,400 ^V 20X coui ees related to employee benefits $468, vt"2nd half, 20X0 real estate taxes olock Steel Supply "$420,00 ?v January purchase of raw materials 24/20Y arion Coun Treasurer East Texas Power &Light Jason & Associates-Freight'Auditors Palmer &Nile Advertising Bullseye Parts, Inc. Arher &Wheel "$1,322,400 Tvt December, "20X9 electric bill 219/20YO "214/20YO 216/20Y $196,00 3v TCharges for auditing 20X9 freightbills $460,00 sv 4th quarter, 20X9 advertising servicees $134,800"v January 2Y0 purchase of repair parts $753,420" v New welding equipment purchaednnuary 20Y0 $288, 540 . TVt. YDecember, 20Xg 'health insurance premiums 219/20YO ed Care nc. Explanation ofAudit Legends V Examined invoice vt Examined invoice and traced to client's year-end adjustment Procedures Requested all unvouchered invoices as of 2/10Y Examined above invoices, noting period to which charges apply Traced 20X charges to elent's 1231/X adjustment for unrecorded invoices Audit Adjustment 9452 ther Professional Services 8340 dvertising Expense 8310 Sales Commissions 9431 FICA Tax Expense 9432 State Unemployment Tax Expense 9480 Printng and Copying Expense 9481 Postage Expense S460" Supplies Expense 2051FIC Payable 2054Unemployment and Workers' Compensation Premiums Payable 2080Accrued Commissions Payable To record 20x9 charges not reflected by Biltrite