accounts payable assertions
Johnny Kang, CPA, is the auditor of the Felix Lee Ltd. Johnny Kang, CPA is considering the audit work to be performed in the accounts payable area for the current year’s engagement. The prior year papers show that confirmation requests were mailed to one hundred of the client’s one thousand suppliers. The selected suppliers were based on Johnny Kang’s sampling, which was designed to select high value items in the accounts payable balance. Johnny Kang and Felix Lee Ltd.’s accountant, DY Anderson spent substantial number of hours resolving relatively minor differences between the confirmation replies and accounting records. Alternative
Required:
1. Identify the accounts payable assertions that Johnny Kang must consider in determining the substantive tests to be followed.
2. Identify situations for which Johnny Kang should use accounts payable confirmations and discuss whether he is required to use them.
3. Discuss why Johnny Kang’s use of large-peso balances as the basis for selecting accounts payable for confirmation might not be the most efficient for selecting accounts payable for confirmation.
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