Case 4. Accounts Payable AccrualAbdul & El-Emir assigned a senior with experience in the retail area to audit accounts payable. Although Nefret had poor internal controls, Abdul & El-Emir selected a sample of 50 for confirmation of the several thousand vendors who did business with Nefret. Twenty-seven responses were received, and 21 were reconciled to Nefrets records. These tests indicated an unrecorded liability of approximately $290,000 when projected to the population of accounts payable. However, the investigation disclosed that Nefrets president made telephone calls to some suppliers who had received confirmation requests from Abdul & El-Emir and told them how to respond to the request. Abdul & El-Emir also performed a purchase cutoff test by vouching accounts payable invoices received for nine weeks after year-end. The purpose of this test was to identify invoices received after year-end that should have been recorded in accounts payable. Thirty percent of the sample ($150,000) was found to relate to the prior year, indicating a potential unrecorded liability of approximately $500,000. The audit firm and Nefret eventually agreed on adjustment to increase accounts payable by $260,000. I

Identify deficiencies in the sufficiency and appropriateness of the evidence gathered in the audit of accounts payable of Nefret Stores

Answer rating: 100% (QA)

There are several deficiencies in the sufficiency and appropriateness of the evidence gathered in th... View the full answer