Which of the following audit procedures is best for identifying unrecorded trade accounts payable?

Which of the following audit procedures is best for identifying unrecorded trade accounts payable?
A. Examining unusual relationships between monthly accounts payable balances and recorded cash payments.
B. Reconciling vendors’ statements to the file of receiving reports to identify items received just prior to the balance sheet date.
C. Reviewing cash disbursements recorded subsequent to the balance sheet date to determine whether the related payables apply to the prior period.
D. Investigating payables recorded just prior to and just subsequent to the balance sheet date to determine whether they are supported by receiving reports.

Last Updated on January 31, 2022 by Admin 3

• AUD CPA : All Parts

• Reviewing cash disbursements recorded subsequent to the balance sheet date to determine whether the related payables apply to the prior period. 
• Investigating payables recorded just prior to and just subsequent to the balance sheet date to determine whether they are supported by receiving reports.
• Examining unusual relationships between monthly accounts payable balances and recorded cash payments.
• Reconciling vendors’ statements to the file of receiving reports to identify items received just prior to the balance sheet date.

Explanation: 
Choice “A” is correct. When performing a search for unrecorded payables, an auditor most likely would examine cash disbursements recorded after the balance sheet date to determine whether the payables related to the prior period have been included in the accounts payable trial balance.
Choice “B” is incorrect. Investigating payables already recorded does not provide any evidence concerning unrecorded payables.
Choice “C” is incorrect. While a high level of cash payments compared with a low level of payable balances may be indicative of unrecorded payables, comparing these amounts would not be the most effective method for identifying unrecorded payables.
Choice “D” is incorrect. Comparing vendor statements to receiving reports is an audit step not involving the accounts payable balances; this step, therefore, provides no information about accounts payable.

• AUD CPA : All Parts