Focus on Understatement

Question 1

How is accounts payable similar to accounts receivable?

Answer 1

Likely to be a material figure in SOFP of most enterprises

Question 2

What is the test of controls on the purchases cycle?

Answer 2

Will have provided the auditors with some assurance as to the completeness of liabilities

Question 3

What should auditors be particularly aware of when conducting their work on SOFP?

Answer 3

Possibility of understatement of liabilities to improve liquidity and profits by understanding the corresponding purchases

Question 4

What are the primary objectives of their work?

Answer 4

To ascertain whether liabilities existing at the year-end have been completely and accurately recorded

Question 5

Primary objectives of trade accounts payable (Satisfactory cut-off invoices year)

Answer 5

Is there a satisfactory cut-off between goods received and invoices received, so that purchases and trade accounts payable are recognised in the correct year?

Question 6

Primary objectivesd of trade accounts payable (accounts payable bona fide)

Answer 6

Do trade accounts payable represent the bona fide amounts due by the company?