As part of the June 30, 2019, audit of accounts payable of Milner Products Company, the auditor sent 22 confirmations of accounts payable to vendors in the form of requests for statements. Four of the statements were not returned by the vendors, and five vendors reported balances different from the amounts recorded in Milner’s accounts payable master file. The auditor made duplicate copies of the five vendors’ statements to maintain control of the independent information and turned the originals over to the client’s accounts payable clerk to reconcile the differences. Two days later, the clerk returned the five statements to the auditor with the information on the audit schedule following part c.
a. Evaluate the acceptability of having the client perform the reconciliations, assuming
that the auditor intends to perform adequate additional tests.
b. Describe the additional tests that should be performed for each of the five statements that included differences.
c. What audit procedures should be performed for the nonresponses to the confirma-
tion requests?
Statement 1 Balance per vendor’s statement
Payment by Milner on June 30, 2019
Balance per master file
$ 7,618.01
(4,601.01)
$ 3,017.00
Statement 2 Balance per vendor’s statement
Credit memo issued by vendor on July 15, 2019
Balance per master file
$ 6,170.15
(1,360.15)
$ 4,810.00
Statement 3 Balance per vendor’s statement
Payment by Milner on July 3, 2019
Unlocated difference not followed up because
of minor amount
Balance per master file
$ 7,319.21
(3,000.00)
615.06
$ 4,934.27
Statement 4 Balance per vendor’s statement
Balance per master file
Difference cannot be located because the vendor failed
to provide details of its account balance
$ 26,251.80
(20,516.11)
$ 5,735.69
Statement 5 Balance per vendor’s statement
Invoices not received by Milner
Payment by Milner on June 15, 2019
$ 9,618.93
(2,733.18)
(2,500.00)
Balance per master file $ 4,385.75
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