ExpertHard1 markMultiple Choice
CPA · Question 22 · Area III: Performing Procedures
An auditor is testing the completeness assertion for accounts payable of a nonissuer. Which of the following procedures would provide the MOST reliable evidence?
An auditor is testing the completeness assertion for accounts payable of a nonissuer. Which of the following procedures would provide the MOST reliable evidence?
Answer options:
A.
Vouching a sample of recorded accounts payable to vendor invoices.
B.
Selecting a sample of cash disbursements made after year-end and examining the supporting documentation to determine if the liability existed at year-end.
C.
Confirming accounts payable with a sample of vendors selected from the year-end accounts payable listing.
D.
Recalculating the mathematical accuracy of the accounts payable subsidiary ledger.
How to approach this question
Completeness = 'What is missing?'. You can't look at the list to find what's not on the list. You must look at OUTFLOWS (payments) after year-end.
Full Answer
B.Selecting a sample of cash disbursements made after year-end and examining the supporting documentation to determine if the liability existed at year-end.✓ Correct
The 'search for unrecorded liabilities' involves examining cash disbursements after year-end. If a payment is made in Jan for services in Dec, a liability should have been recorded in Dec. This directly tests Completeness.
Common mistakes
Selecting Option C (Confirmations). While confirmations can test completeness, selecting from the AP list makes it an Existence test. You'd need to select from a vendor master file to test Completeness.
Practice the full CPA AUD Practice Exam 2
78 questions · hints · full answers · grading
More questions from this exam
Q01An auditor is performing an audit of a nonissuer's financial statements. During the engagement, t...HardQ02A CPA firm is auditing the financial statements of an issuer, TechGlobal Inc. The lead audit part...HardQ03An auditor is conducting an audit of a nonissuer in accordance with GAO Government Auditing Stand...HardQ04During the audit of a nonissuer, the auditor identifies a significant risk of fraud related to re...HardQ05An auditor is accepting an engagement to audit the financial statements of a new nonissuer client...Hard