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Topic
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Which of the following procedures would an auditor most likely perform in searching for unrecorded liabilities?
A. Trace a sample of accounts payable entries recorded just before year-end to the unmatched receiving report file
B. Compare a sample of purchase orders issued just after year-end with the year-end accounts payable trial balance
C. Vouch a sample of cash disbursements recorded just after year-end to receiving reports and vendor invoices
D. Scan the cash disbursements entries recorded just before year-end for indications of unusual transactions
Of the responses provided, vouching a sample of cash disbursements recorded just after year-end to receiving reports and vendor invoices would most likely be performed by an auditor searching for unrecorded liabilities.
This procedure would assure the auditor that the cash disbursements were not for liabilities which should have been recorded in the prior year.
Tracing tests for completeness. Vouching tests for existence. If you want to make sure that there are no unrecorded liabilities, wouldn’t you make sure that all liabilities are in fact recorded, which would be completeness?
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