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You are in the process of auditing a publishing company named Hamilton & Burr (“H&B”), a private company, as of and for the year ended December 31, 2019 (it is now March 2020). H&B shows $2,972,865 as the balance of accounts payable in the general ledger as of 12/31/19. You foot the 12/31/2019 accounts payable ledger by vendor getting a total of $3,135,680. As the auditor, what steps would need to be taken at this point? What objectives would you be concerned about?

Assuming the client corrects the G/L balance and provides a corrected report, you then proceed with test work. Your audit program for this area requires you to obtain the cash disbursements (“C/D”) journal for the period subsequent to year-end and to set a threshold for material misstatements (performance materiality) of $152,000 for accounts payable. Upon making selections for those transactions from the C/D journal, you note that $320,650 in subsequent payments related to vendor payables where goods were received/services were performed during 2019 and were recorded as payables as of December 31, 2019. You find that there are $413,814 in subsequent payments that relate to vendor payables for goods received/services that occurred in 2020 and were recorded in 2020. You also note $138,675 in payments to vendors for goods and services related to 2019 and recorded in 2020. What audit objectives should you consider relevant to audit H&B’s accounts payable balance? What would be the audit response to the results of the procedures performed? Explain the basis for your responses.

Guide for Case 4:

Your discussion should focus on your substantive audit testing procedures for accounts payable. The paper should have a professional appearance and include specific references to professional literature (AU-C) and the textbook. Your paper will need to be more conceptual since there are not enough specific details and information to actually “solve” the differences noted in accounts payable. Focus more on procedures and approach of what you would do and why.

Answer rating: 100% (QA)

There are several audit objectives relevant to Hamilton Burrs HB accounts payable balance The first ... View the full answer