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CHAPTER 16 - Coggle Diagram
CHAPTER 16
Confirmation of trade payables
Supposedly does not require confirmation
Because auditor can obtain evidence from suppliers invoice & statement
However, where IC is not robust, then SS may not be available
So, must take confirmation
Where IC is robust
Still can take confirmation
IC is robust
Confirm large balances
IC is not rebust
Confirm large balance
Confirm other supplier with a small / zero balance
Confirm a sample of other accounts
Type of confirmation
Positive confirmation
Blank / zero-balance confirmation
Require supplier to declare the amount owed at year end
Require supplier to provide detailed statement of bank account
Differences
Must be investigated & reconciled
Reasons
Goods in transit
Cash in transit
Disputed invoices
Check the possibility of understatement of payables
Client want to improve liquidity & profits
Primary objectives
Is there satisfactory cut-off bet. goods received & invoice received
Do acc. payables represent the bona fide amounts due by the company
To test completeness of trade payables
Usually by reconciliation
However, if client has not carry out reconciliation of SS with month-end balances
Supplier need to compare supplier statement with YE payable balances