ExpertMedium1 markMultiple Choice
CPA · Question 30 · Area 3: Performing Procedures
In performing a search for unrecorded liabilities, which of the following procedures would be most effective?
In performing a search for unrecorded liabilities, which of the following procedures would be most effective?
Answer options:
A.
Vouch a sample of accounts payable entries recorded before year-end to receiving reports.
B.
Examine cash disbursements recorded after the balance sheet date.
C.
Confirm accounts payable with a sample of vendors with small or zero balances.
D.
Recalculate accrued interest expense.
How to approach this question
Identify the assertion: Completeness (Unrecorded). Best test: Look at what happened *after* year-end (payments) to see if it belonged in the prior year.
Full Answer
B.Examine cash disbursements recorded after the balance sheet date.✓ Correct
Examining subsequent cash disbursements is the primary procedure to detect unrecorded liabilities. The auditor selects payments made after year-end and examines the supporting documentation (invoice date, receiving date) to determine if the liability related to the period under audit.
Common mistakes
Selecting vouching (Existence) instead of tracing/subsequent review (Completeness).
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