When confirming accounts payable emphasis should be put on what kind of accounts?

journal article

The Accounting Review

Vol. 37, No. 1 (Jan., 1962)

, pp. 135-145 (11 pages)

Published By: American Accounting Association

https://www.jstor.org/stable/242270

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The Accounting Review is the premier journal for publishing articles reporting the results of accounting research and explaining and illustrating related research methodology. The scope of acceptable articles embraces any research methodology and any accounting-related subject. The primary criterion for publication in The Accounting Review is the significance of the contribution an article makes to the literature.

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The American Accounting Association is the world's largest association of accounting and business educators, researchers, and interested practitioners. A worldwide organization, the AAA promotes education, research, service, and interaction between education and practice. Formed in 1916 as the American Association of University Instructors in Accounting, the association began publishing the first of its ten journals, The Accounting Review, in 1925. Ten years later, in 1935, the association changed its name to become the American Accounting Association. The AAA now extends far beyond accounting, with 14 Sections addressing such issues as Information Systems, Artificial Intelligence/Expert Systems, Public Interest, Auditing, taxation (the American Taxation Association is a Section of the AAA), International Accounting, and Teaching and Curriculum. About 30% of AAA members live and work outside the United States.

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Most large companies prepare financial statements in accordance with generally accepted accounting principles (GAAP). To ensure compliance, these companies must hire an independent auditor to verify all financial accounts. One important account that auditors pay attention to is the balance of accounts payable. Moreover, when confirming the accounts payable balances, auditors have their own guidelines as to which documentary proof more emphasis should be put on.

  Accounts Payable Sampling

·         The first thing you should be aware of before conducting an audit of a company's accounts payable is that auditors utilize sampling rather than confirming every dollar that comprises the account balance. Sampling entails choosing specific invoices and payables that are representative of the company's purchasing and borrowing activity. However, auditors should always ensure there is emphasis on the larger transactions a company engages in. For example, if three purchase invoices account for80 percent of a company's payable account, auditors must focus on auditing each invoice.

Confirming Purchase Invoices

·         For most companies, the accounts payable balance will include an array of invoices for the purchase of assets, supplies, equipment and services. Once the auditor evaluates the sample population of invoices to investigate, each one requires confirmation. Confirming invoices requires review of the actual invoice, confirming that the invoice amount is the same as the amount the company records on its books and verifying that the company actually receives what it pays for. For example, if an invoice covers the purchase of inventory, standard audit practice requires the auditor to physically check some of the inventory on hand.

Long-Term Payables

·         Depending on the capital structure of a company, the payables account can also include a significant amount of loan and interest payments. The first step in confirming the balance is to request the actually promissory note or loan agreement for each debt. Obtaining the promissory note will verify the principal balance of the loan and the interest rate. With this information, an auditor can review the entries the company records to ensure that the proper amount of interest and principal is accrued. In addition, if the company receives periodic statements from the bank, retrieving each statement can provide further assurance of the account balance.

Fraudulent Activity

·         With the recent advent of fraudulent activity within large corporations, more emphasis has been placed on detecting fraud. When auditors review any activity within the accounts payable account, the detection of fraud must always be part of the evaluation. An auditor has many ways to detect fraud in the accounts payable account, such as verifying that the invoicing company actually exists and is not fictitious, monitoring any abnormal transactions, such as a sudden spike in a specific employee's salary and verifying some of the bank accounts where payments are sent.

When confirming accounts payable The approach is most likely to be one of?

When using confirmations to provide evidence about the completeness assertion for accounts payable the appropriate population most likely would b?

What is generally considered to be the best method for finding unrecorded accounts payable?

When an auditor finds a debit to accounts payable?