The client$$s controller informs you that unmailed checks totaling $$48,500$ were on hand at December $31$ of the current year. He states that these December$-$dated checks had been entered in the cash disbursements journal and charged to the respective creditors$$ accounts in December because the checks were prenumbered. However, these checks were not actually mailed until early January. The controller wants to adjust the cash balance and accounts payable at December $31$ by $$48,500$ because the Cash account had a credit balance. He objects to submitting to his bank your audit report showing an overdraft of cash.

Discuss the propriety of adjusting the cash balance and accounts payable by the indicated amount of outstanding checks.

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Auditors are concerned with assertions in creating their audit steps. When creating and tailoring audit steps, auditors must keep the assertions and objectives in mind.

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CONCEPT REVIEW:

A well$-$designed substantive portion of an audit includes all necessary assertions. When designing procedures, auditors must be mindful that they have included all objectives in their substantive procedures.