Test The list of year-end trade creditors was obtained and 14 suppliers were chosen at random. Year-end
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Question:
Test
- The list of year-end trade creditors was obtained and 14 suppliers were chosen at random. Year-end balances owed were traced to invoices and goods-received-notes so as to make sure that goods arrived before the end of the year. For two of the creditors (out of the 14 selected) the balance was overstated, but only by a relatively small amount.
Conclusion - As no materials errors were detected the reported amounts have been accepted.
- 18 creditors invoices were chosen at random and were examined to ensure that prices and discount conditions had been checked and approved by the manager of the purchases department. 3 of the 18 invoices were not correctly authorised and contained errors with the discounts which had been applied. A thorough assessment of the three invoices with the errors did not find any pattern or reason for the mistakes.
Conclusion - As discounts claimed were immaterial the reported amounts have been accepted.
Required
For both accounts payable tests undertaken , determine:
- Whether the test is a test of control or substantive test.
- The key assertion addressed by each test.
- The reasonableness of the conclusion reached for each test.
- Additional audit procedures, if any, that need to be performed.
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