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    Uncover unrecorded liabilities and give audit procedures

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    Problem posted:

    As part of the audit of different audit areas, auditors should be alert for the possibility of unrecorded liabilities. For each of the following audit areas or accounts, describe a liability that can be uncovered and the audit procedures that can uncover it:
    a. Minutes of the board of directors meetings
    b. Land and buildings
    c. Rent expense
    d. Interest expense
    e. Cash surrender value of life insurance
    f. Cash in the bank
    g. Officers' travel and entertainment expenses

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    Solution Preview

    a. Contracts may have been authorized and signed that represent a liability or a contingent liability may be noted in the minutes of the board. Audit procedure: read minutes.
    b. There may be a lien on land or buildings or a mortgage that is not recorded. Audit procedure: review purchase documents for obligations at purchase, check loan ...

    Solution Summary

    One or two ideas for each unrecorded liability and an audit procedure is given. The audit areas and accounts discussed include: minutes of the board of directors meetings, land and buildlings, rent expense, interest expense, cash surrender value of life insurance, cash in the bank, and officers' travel and entertainment expenses.