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Audit: Relating errors, frauds, audit procedures, assertions

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Indicate the specific detailed test or tests that might address the error, fraud, or circumstance and the financial statement assertion addressed by each test.

a. The aged trial balance does not agree with individual accounts payable ledger.
b. The auditor suspects that accounts payable is overstated.
c. Several shipments were received from an overseas FOB shipping point on January 2, 2008.
d. The December 31, 2007, accounts payable balance appears low in comparison with the prior two years.
e. The Accounts Payable department maintains a file of unmatched received reports, that is, receiving reports for which an invoice had not yet been received.

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a. The aged trial balance does not agree with individual accounts payable ledger.

This would depend on which was larger and which matched the financial statements. I would assume the larger contained more than the smaller of the two and so the one with the smaller amount is missing some. However, you are "on notice" that the expenditure process is defective. If I thought I could rely on controls, I would revise that assumption and increase substantive tests of the AP process. For instance, I would select the largest invoices and trace them to the aging and see if they are included and aged properly.

Assertion: Accuracy

b. The auditor ...

Solution Summary

Your tutorial is 231 words giving you concrete tests that you could perform to verify if the suspected error or misstatement is, in fact, true. The relevant assertions are shown.

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