AUDITINGCHAPTER 13.ppt

GBW 8th ed., Ch. 13 AUDITINGCHAPTER 13 Accounts Payable, Prepaids, Accrued Liabilities By David N. Ricchiute TOPICS Relationship assertions audit procedures Relationship audit risk, nonfinancial measures, substantive tests Substantives tests for A/P Substantive tests for prepaid expenses, accrued liabilities Expense recognition earnings manipulation* Audit sampling A/P Computer-assisted audit techniques for A/P ASSERTIONS OBJECTIVES Management assertions: Recorded Purchases A/P Exist Include all transactions (completeness) Represent rights, obligations of entity Are valued appropriately Are presented disclosed properly AUDIT RISKS Payment problems Insufficient cash Overstated purchases Understated payables OBJECTIVES PROCEDURES: Existence/Occurrence Objective: determine whether all payables exist all purchases occurred Exist Confirm with creditors Transactions occurred Cutoff testing for proper period OBJECTIVES PROCEDURES:Completeness Objective: determine whether all purchases, payables are actually presented Complete Test for unrecorded liabilities Analytical procedures Test cutoff FOB shipping point FOB destination OBJECTIVES PROCEDURES:Rights Obligations Objective: determine whether payables other recorded liabilities are bona fide obligations Rights obligations Confirm with creditors Test for unrecorded liabilities OBJECTIVES PROCEDURES:Valuation, Allocation Objective: determine whether payables are reported at appropriate dollar amounts Valuation, allocation Verify A/P trial balance Confirm with creditors Test for unrecorded liabilities OBJECTIVES PROCEDURES:Presentation, Disclosure Objective: determine whether payables are properly classified, described, disclosed Presentation, disclosure Compare statement presentation, disclosure with GAAP requirements NONFINANCIAL MEASURES OF RISK Examples for payables: Failure to get low price provider Unfavorable price variances Significant lag in product development AUDIT RISK MODEL AR = CR x IR x