You are auditing accounts payable at Cornflour Ltd. These accounts are material with a high risk. The

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Question:

You are auditing accounts payable at Cornflour Ltd. These accounts are material with a high risk. The accountant provided you with copies of purchase orders, supplier invoices, delivery notes, bank statements, and discounts or allowances from suppliers. Cornflour has grown rapidly and has a large number of suppliers with balances ranging from thousands to millions. Mick, a junior auditor, suggests that the team use payable confirmation to gather evidence about the completeness of accounts payable.

(i) Identify the strengths and weaknesses of Mick’s approach.
(ii) In terms of the persuasiveness of the evidence, classify the accountant’s records from most persuasive to least persuasive. Has the auditor achieved the highest level of persuasiveness from these records?
(iii) If confirmation is used, suggest and explain one sampling method that the auditor can use to select creditors for testing. What form of confirmation should be used? Justify your answer.