Integrated Audit Practice Case

SEVENTH EDITION

Assignment SEVEN

Discussion Questions

1. How do the results of tests of controls and substantive tests of transactions for

acquisitions tests affect the extent of testing in the audit of accounts payable?

2.What are the primary objectives in the audit of accounts payable? How did this affect the

testing method used, and how the results were evaluated compared to your tests of accounts receivable?

3.The client received and recorded a large shipment of inventory on January 3 that was

shipped FOB shipping point on December 29. How should the auditor account for this

in the search for unrecorded liabilities?

4.Confirmations were emphasized in tests of accounts receivable, but are rarely used in tests of accounts payable. What factors account for this difference? When would confirmation of accounts payable be appropriate?

5.The client received a shipment of inventory late on December 31 after the physical inventory count was completed. Because the inventory was not recorded at year-end, the client also did not record the related liability until January. How might the auditor detect this

misstatement? Assume the purchase was for inventory with a cost of $40,000. What is the

effect on accounts payable and net income in the year under audit due to the failure to

record this transaction?