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Supplier: Lily Co
Statement balance 175000
Payables ledger balance 105000Which of the following audit procedures should be performed in relation to the balance
with Lily Co to determine if the payables balance is understated?1. Inspect the goods received note to determine when the goods were received
2. Review the post year?end cashbook for evidence of payment of the invoicemaam one again i wanted to understand why statement 2 is not the answer? reviewing post-yr end cashbook will help us in analysing if there are any unrecorded payables!
but somehow my kit states that statement 1 is the ONLY right answer! i do get why statement 1 is right, but not why statement 2 is wrong?
Because the $70,000 is only a liability if goods for that amount were received before the y/e – say 31 December. If the goods were received on 1 January and the supplier is paid $175,000 on 31 January that does not mean that payables of $105,000 is understated.
maam again just didn’t get you! apologies for causing you so much trouble…
my only point is that if post year end $175000paid to that supplier, then that clearly indicates that $70,000 of lability was understated.
You seem to be rushing to read through answers and firing back responses without reflection. If $175,000 was paid on 1 January that would certainly suggest that it was owing on 31 December – but the mere fact that $175,000 is paid sometime after 31 December … later in January … in February … in March … at any later time … cannot be assumed to have been owing at the reporting date.
accept my apologies maam. Absolutely sorry for this behaviour.
and thank you am clear with this now!
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