Essentials of Auditing and Assurance Services Chapter 12
Case #12-31
Parts 1 and 2 of this case study dealt with obtaining an understanding of internal control and assessing control risk for transactions affecting accounts payable of Pinnacle Manufacturing. In Part 3 we design analytical procedures and design and perform tests of details of balances for accounts payable
Assume that your understanding of internal controls over acquisitions and cash disbursements and the related tests of controls and substantive tests of transactions support an assessment of a low control risk. Also assume that analytical procedures support the overall reasonableness of the balance. Accounts payable at December 31, 2002 are included in Figure 12-8 page 366
A
List those relationships, ratios, and trends that you believe will provide useful information about the overall reasonableness of accounts payable
B
Prepare an audit program in a design format for tests of details of balances for accounts payable. Before preparing the audit program you should review the Hillsburg Hardware Company design format audit program in Table 12-4 page 357 and performance format audit program in Table 12-5 page 358. You should prepare a matrix similar to the one in Figure 22-7 on page 356 for accounts payable. Assume that acceptable audit risk was assessed as high.
