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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Audit procedures and obtaining evidence

Kestrel Co's auditor wishes to test completeness of trade payables at the year-end. Which procedure is most appropriate?

Reconciling supplier statements to the ledger, including suppliers with nil or small balances, is most appropriate because it can reveal liabilities that were never recorded. Testing the largest recorded balances only checks for overstatement, which relates to existence rather than completeness of payables.

  1. ASelect a sample of purchase ledger balances and agree them to supplier invoices
  2. BObtain supplier statements for a sample of suppliers, including some with zero or small balances, and reconcile them to the ledgerCorrect
  3. CRecalculate the ageing analysis of payables
  4. DSend positive confirmation requests to the suppliers with the largest balances

Explanation

Completeness of liabilities is the risk of understatement. Supplier statements, including those for suppliers with nil or small balances, can reveal unrecorded liabilities. Testing the largest recorded balances only addresses overstatement, which is existence, so it is the weaker answer.

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