ExpertMedium1 markMultiple Choice
CPA · Question 25 · Area III: Performing Procedures
An auditor is testing the completeness assertion for accounts payable. Which of the following procedures is MOST appropriate?
An auditor is testing the completeness assertion for accounts payable. Which of the following procedures is MOST appropriate?
Answer options:
A.
Select a sample of recorded accounts payable at year-end and vouch to receiving reports.
B.
Select a sample of cash disbursements made after year-end and examine the supporting documentation to determine if the liability existed at year-end.
C.
Confirm outstanding balances with vendors having large year-end balances.
D.
Recalculate the mathematical accuracy of the accounts payable subsidiary ledger.
How to approach this question
Completeness = What is missing? Start from outside the ledger (e.g., subsequent payments, receiving reports) and trace TO the ledger.
Full Answer
B.Select a sample of cash disbursements made after year-end and examine the supporting documentation to determine if the liability existed at year-end.✓ Correct
Select a sample of cash disbursements made after year-end and examine the supporting documentation to determine if the liability existed at year-end.
The search for unrecorded liabilities involves examining subsequent cash disbursements. If a bill was paid in January for services in December, it should have been an AP in December. This is the primary test for AP Completeness.
Common mistakes
Vouching from the ledger (tests existence) instead of tracing from source/payments (tests completeness).
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