Clark and his partner Kent both PAs are planning their
Clark and his partner, Kent, both PAs, are planning their audit program for the audit of accounts payable on the LeClair Corporation’s annual audit. Saturday afternoon, they reviewed the thick file of last year’s working papers, and both of them remembered all too well the six days they spent last year on accounts payable. Last year, Clark had suggested that they mail confirmations to 100 of LeClair’s suppliers. The company regularly purchases from about 1000 suppliers and these account payable balances fluctuate widely, depending on the volume of purchases and the terms LeClair’s purchasing agent is able to negotiate. Clark’s sample of 100 was designed to include accounts with large balances. In fact, the 100 accounts confirmed last year covered 80% of the total accounts payable.
Both Clark and Kent spent many hours tracking down minor differences reported in confirmation responses. Non-responding accounts were investigated by comparing LeClair’s balance with monthly statements received from suppliers.

a. Identify the accounts payable audit objectives that the auditors must consider in determining the audit procedures to be performed.
b. Identify situations when the auditors should use accounts payable confirmations, and discuss whether they are required to use them.
c. Discuss why the use of large dollar balances as the basis for selecting accounts payable for confirmation may not be the most efficient approach, and indicate a more efficient sample selection procedure that could be followed when choosing accounts payable for confirmation.

Membership TRY NOW
  • Access to 800,000+ Textbook Solutions
  • Ask any question from 24/7 available
  • Live Video Consultation with Tutors
  • 50,000+ Answers by Tutors
Relevant Tutors available to help