Question

Which of the following is a substantive procedure that an auditor most likely would perform to verify the existence and valuation assertions about rcorded accounts payable?

Answer 1

An auditor would likely confirm accounts payable directly with creditors, inspect related documentation such as invoices, and perform cut-off tests to verify the existence and valuation of recorded accounts payable.

Step-by-step explanation:

The question is about the audit process, specifically the procedures an auditor performs to verify the existence and valuation of recorded accounts payable. One substantive procedure an auditor would likely perform is to select a sample of accounts payable entries and confirm these liabilities directly with the creditors. The auditor might send confirmation requests to verify the amounts owed, terms, and the existence of the liabilities. Another procedure is to inspect purchase orders, receiving reports, and vendor invoices to ensure that the accounts payable are recognized in the proper period and at the appropriate amounts, therefore testing valuation and existence assertions. Additionally, the auditor may perform year-end cut-off tests to ensure that transactions are recorded in the correct accounting period.