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Which of the following procedures are appropriate to test for completeness of trade payables at year end
1 review outstanding invoices in the purchase ledger greater than 3 months old and enquirecof management they are valid outstanding liabilities
2 perform supplier statement reconciliation for a sample of suppliers
3review bnk stmts for payment made after year end to identify those payments relating to pre year end liabilities
4 select a sample of invoices in the purchase ledger at year end and agree payment made to bank stmt at post year endWhy is answer 2 and 3
It must not have been 2 and 4
Invoices to purchase ledger to payment is not checking for completeness
Whereas
Agreeing bank statement to pre year end liability isnt checking existence(vouching)See what I have just written in this post about the meaning of completeness https://opentuition.com/topic/audit-procedure-audit-responses-substantive-procedure-etc/
Trade payables shown as $1m in the financial statements will be incomplete if any amount is missing – agreed?
You can’t find what is missing by looking at what has been recorded – you are looking for what has NOT been recorded.
So the correct answer cannot be either 1 or 4 because invoices in the purchase ledger have been recorded.2 – will reveal invoices raised by suppliers that have not been recorded – as clearly reconciling items.
3 – I think this is self-explanatory – would you not expect payments immediately after the year end to relate to amounts due at the year end? So if they are not payables/accruals at the year end perhaps they are omissions?
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