Ch 14 - Accounts Payable and Other Liabilities

What are some common payroll deductions?

-Savings bonds -Union dues -Retirement plans -Charitable contributions -Insurance

What should be considered in auditing accrued pension liability?

-Service cost -Interest cost -Amortization of service costs -Gains/losses on assets

What are some current liabilities?

1. Amounts withheld form employees' pay 2. Sales taxes payable 3. Unclaimed wages 4. Customers' deposits 5. Accrued liabilities

When it comes to unclaimed wages, what are auditors most concerned with?

Internal control

Which liability account is most suited for preliminary audit work?

Accrued property tax

Ordinarily, the most significant assertion relating to accounts payable is what?

Completeness

How does one validate the amount in the general ledger control account?

By tracing posting to the voucher register and cash disbursement journal

4. "Vouchers supporting increase in leasehold improvements."

Delete text - no changes took place

6. "Documentation supporting change in capital stock outstanding."

Delete the text

Which of the following is the best audit procedure for determining the existence of unrecorded liabilities?

Examine selected cash disbursements in the period subsequent to year-end.

In performing a test of controls, the auditors vouch a sample of entries in the purchases journal to the supporting documents. Which assertion would this test of controls most likely test?

Existence

How are all property taxes generally analyzed?

In working papers

What are the basic auditing steps for accrued liabilities?

1. Examine any contracts on hand that provide the basis for the accrual 2. Appraise the accuracy of the detailed accounting records maintained for this category of liability 3. Identify and evaluate the reasonableness of the assumptions made that underlie the computation of the liability 4. Test computations made by the client in setting up the accrual 5. Determine that accrued liabilities have been treated consistently at the beginning and end of the period 6. Consider the need for accrual of other accrued liabilities not presently considered (completeness) 7. For significant estimates, perform a retrospective analysis of the prior year's estimates for evidence of management bias

For effective internal control, the accounts payable department should compare the information on each vendor's invoice with what?

Receiving report and purchase order

What is your determination of the following callout: "Accounts receivable summarized by date of most recent purchase."

Replace with "Accounts receivable aged by date due."

7. "Management's review of receivables from officers."

Replace with "Copy of loan agreement with Mr. Best."

What is your determination of the following callout: "Invoices supporting depreciation expense for the year."

Replace with "Schedule of details of depreciation expense calculation for 20X5."

What is your determination of the following callout: "Software development cost invoices and other support."

Retain original text

Which of the following procedures is least likely to be completed before the balance sheet date?

Search for unrecorded liabilities

5. "Detailed analysis and reconciliation of each unpaid account payable at year-end."

Trial balance of accounts payable at the balance sheet date. Detailed analysis is not necessary at this point and A/P are not an amortizable account.