Index [_______]

Accounts Payable and Other Liabilities Audit Program

Entity: Balance Sheet Date:

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FINANCIAL STATEMENT ASSERTIONS

E/O Existence or occurrence
C Completeness
R/O Rights or obligations
V Valuation or allocation
A/CL Accuracy or classification
CO Cutoff

IDENTIFICATION CODES

The letters in the left column labeled “Assertions” indicate

that the audit procedure provides assurance about the
indicated assertions. If the letter appears in a bracket (for
example, [E/O], [C], etc.), the audit procedure only
secondarily provides assurance about the assertion. If an
asterisk (*) precedes a procedure, it is a preliminary step or
follow-up step.
BASIC PROCEDURES

Accounts Payable
E/O, C, S 1. Compare the balances in trade accounts payable and
[R/O], V, purchases with those of prior periods or other
A/CL, [CO] expectations. Relate the level of activity to inventory
levels and sales volume. Investigate any unusual
fluctuations, considering known changes in client
operations.
E/O, C, S 2. Obtain a listing of trade accounts payable as of the
[R/O], balance-sheet date. Agree or reconcile the balance to
A/CL the general ledger.
S a. Scan the listing and investigate any unusual or old
items.
S b. Scan the listing for related-party accounts payable.
Determine that appropriate financial-statement
disclosures are made.
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C, A/CL, S 3. With respect to unrecorded liabilities, do the following:
CO
S a. Inquire of responsible client personnel about:
S (1) Procedures for processing invoices and the
consistency of such procedures with those of
prior years.
S (2) Their knowledge of additional sources of
unprocessed invoices, commitments, or
contingent liabilities and whether accruals have
been made for such items as of the balance-
sheet date. (See the separate general program
for additional procedures to detect
commitments and contingent liabilities and to
review for subsequent events.)
S b. Trace receiving cutoff information obtained during
inventory observation to the accounting records,
noting whether the liability for the merchandise is
recorded in the proper accounting period.
E/O, C, S 4. Perform a search for unrecorded liabilities.
R/O, A/CL,
CO
S a. Review the cash disbursements journal for
disbursements after the balance-sheet date. Obtain
and examine supporting detail for material
disbursements and determine whether the goods
or services on the paid invoices were received on or
before the balance-sheet date. If so, determine
whether the liability is recorded. Document the
source and selection criteria for items tested. (If
the entity uses a voucher register, consider
performing these procedures on material
transactions vouchered after the balance-sheet
date.)
S b. Inspect files of unprocessed (or unvouchered)
invoices and vendor statements. If the goods or
services were received on or before the balance-
sheet date, determine whether the liability is
included in the accounts payable listing (or the
listing of accrued liabilities).

Accruals and Other Liabilities

E/O, C, S 5. Compare the balances in accrued liabilities with those
[R/O], V, of prior periods or other expectations. Investigate any
A/CL, [CO] unusual fluctuations, considering known changes in
client operations.

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E/O, C, S 6. Scan the working trial balance and determine those
[R/O], V, accrual or other liability accounts for which additional
A/CL, CO testing should be performed.
S a. Determine the basis and method of accrual.
S b. Test the reasonableness of the accrual by
performing a predictive test of the amount.
S c. Consider whether immaterial balances are
reasonable and whether any needed accruals are
missing.
C, A/CL, S 7. Scan the expense accounts in the working trial balance
[CO] and compare their balances to prior-period balances or
other expectations. Investigate unusual fluctuations
(that is, variations different from what would be
expected, considering known changes in client
operations or economic conditions) or the absence of
accrued expense items that existed in the prior period
that may indicate an unrecorded accrual.
C, A/CL 8. Consider whether the entity has financial instruments
with characteristics of both liabilities and equity that
should be classified as liabilities in the balance sheet.
A/CL S 9. Accumulate or summarize in the workpapers the
information needed for any required financial-
statement disclosures.

Concluding Audit Steps

* S 10. Consider the need to apply one or more additional
procedures. The decision to apply additional
procedures should be based on (a) your risk
assessment (b) a consideration of whether information
obtained or misstatements detected by performing
audit procedures or from other sources during the
audit alter your judgment about the assessed risk of
material misstatement (whether caused by error or
fraud), and (c) an evaluation of whether the procedures
performed have provided sufficient assurance. If risks
or other conditions are identified that require an
additional audit response, ensure that those risks or
conditions and your response are documented.
* S 11. Consider whether the results of audit procedures
indicate internal control related matters that are
required to be communicated to management and
others. If so, add to the memo of points for the
communication of internal control related matters.

Conclusion

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* S 12. We have performed procedures and obtained audit
evidence sufficient to provide reasonable assurance
about accounts payable and other liabilities (to support
our opinion on the financial statements taken as a
whole). The procedures performed, relevant evidence
obtained, and our conclusions are adequately
documented. (If you are unable to conclude, prepare a
memo documenting your reason and the implications
for the engagement, including the audit report.)

[ ]

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EXTENDED PROCEDURES (PROCEDURES FOR ADDITIONAL
ASSURANCE)

Accounts Payable
Test of Mechanical Accuracy and Review of Accounts
Payable Listing
S 1. Perform the following on the listing of trade accounts
E/O, C, payable:
R/O, V,
A/CL
S a. Test the clerical accuracy of the listing. (If the client
maintains accounting records on the cash basis,
also test the supporting schedules for the journal
entry necessary to record the accounts payable.)
b. Compare the listing to the listing at the end of the
prior period, watching for amounts significant in
the prior period but not significant in the current
period.
S c. Scan the listing for large debit balances and
consider confirming individually significant debit
balances during the accounts receivable audit
procedures. Document the items selected for
confirmation. Prepare a reclassifying adjustment if
debit balances are significant.
S d. Inquire about the following matters:
S (1) Whether there are noninterest bearing
liabilities with explicit payment terms included
in the listing. If so, consider reclassifying such
term liabilities to notes payable and consider
whether the liabilities should be discounted.
S (2) Whether assets are pledged as collateral on
such liabilities. If so, obtain supporting
evidence of the assets pledged and accumulate
carrying amounts for disclosure.

Confirmation Procedures
2. Perform the following confirmation procedures:
E/O, C,
R/O, A/CL,
[CO]
a. Select accounts payable vendors to which
confirmation letters should be mailed:
(1) Document the items selected for confirmation.

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(2) Review the vendors selected for confirmation
with the client. If the client objects to the
confirmation of a particular vendor, investigate
the reason and consider whether alternative
procedures will compensate.
b. Have the client prepare the confirmation letters.
c. Control the mailing of the letters.
d. Send a second request approximately [ ] days
after the first mailing. Determine the cause for
confirmation requests returned as undeliverable. If
possible, obtain new addresses and remail.
e. Test the completeness and accuracy of the
accounts payable listing by reconciling confirmation
replies to the individual account balances.

Alternative Procedures on Nonreplies or Unconfirmed

Accounts
3. Perform the following alternative procedures on
E/O, C, nonreplies of accounts payable confirmations and/or
R/O, A/CL, selected unconfirmed accounts:
CO
a. Examine unpaid invoices, receiving reports, and
bills supporting the recorded balances.
b. If possible, examine vendor statements dated near
the balance-sheet date. Reconcile statement
balances to the balances recorded in the client’s
account.
c. Vouch subsequent payment of the liability.
d. Inspect invoices from the selected vendor for
purchases of goods and services subsequent to the
balance-sheet date. Determine whether invoices
reflect an amount that was owed as of the balance-
sheet date.

Additional Procedures in Response to Fraud Risk

Assessment
4. If, based on the consideration of identified fraud risks, a
E/O, C, decision is made to modify confirmation procedures,
R/O, A/CL, consider performing the following:
[CO]
a. Send blank (“blind”) confirmations requesting the
vendor to provide information about all
outstanding invoices. The confirmation may also
request other information such as payment
histories.

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Accruals and Other Liabilities
Examination of Subsequent Payments
5. Test the reasonableness of accruals and other liabilities
E/O, C, by examining subsequent payments or other
R/O, A/CL, supporting documents.
CO
Other Procedures for Additional Assurance
6. Other additional procedures (describe):
* [ ]

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