Discuss audit tests of notes payable and related accounts and transactions.
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Discussion topic:
1. An audit program relates to the acquisition, fixed assets, notes payable and equity cycles and accounts.
Discuss audit tests of notes payable and related accounts and transactions.
How would your current employer or a previous employer do if their fixed assets, notes payable and equity cycles and accounts were audited?
Student Post
2. Discuss audit tests of notes payable and related accounts and transactions.
Auditing accounts payable, whether as part of a larger internal audit or as a standalone process, is an essential weapon in the war on fraud and inaccuracy. For companies doing business in or with the United States, accounts payable audit procedures are ideally guided by auditing standards set forth by the American Institute of Certified Public Accountants (AICPA). This ensures the audit achieves four critical benchmarks for clarity, accuracy, and comprehensiveness—namely:
Proper disclosure of end-of-year financial statements is critical to accurate financial reporting, strategic forecasting, and procurement. Unusual transactions are documented, contextualized, and clarified as needed. Management completes all necessary documentation verifying that the company’s financial statements are complete, and fully record all AP and purchasing amounts.
A thorough payable audit is one that ensures accounts payable is fully compliant with GAAP. Using the year-end (or end-of-period) financial statements (including income and cash flow statements as well as the balance sheet), auditors choose and trace general ledger entries back to their creation to form an audit trail. This trail reveals any potential control weaknesses in the accounting system and areas where compliance can be improved.
https://www.purchasecontrol.com/blog/accounts-payable-audit-procedures/
3. Discuss audit tests of notes payable and related accounts and transactions.
The legal obligation to a creditor, is notes payable, which may be unsecured or secured by assets, and bears interest. The objective for the audit of notes payable are to verify that internal controls over notes payable are adequate, transactions for principle and interest involving notes payable are properly authorized and recorded in accordance with the six transaction related audit objectives. That the liability for notes payable are the related interest expense and accrued liability are properly stated as defined by seven of the eight balance related audit objectives and disclosures related to notes payable and the related interest expenses satisfy the four presentations and disclosure audit objectives. Tests of notes payable transactions involve the issue of notes and the repayment of principle and interest. Using Analytical procedures allows the auditor to make independent predictions of interest expenses, using average notes payable outstanding and average interest rates, and helps the auditor evaluate the reasonableness of interest expenses and also tests for omitted notes payable. The two most important balance related audit objectives in notes payable is that the existing notes payable are included which indicates completeness and for accuracy the notes payable in the schedule are accurately recorded. (Arens, Elder, & Beasley, 2014, )
At my previous employer, which was a restaurant where I helped out in the office with a little bookkeeping, HR and other office tasks I think they would do okay. Most of the restaurants transaction with vendors were COD, I only know of one vendor that we paid monthly to with interest. The owner owned the building, I do believe that a loan was taken out for remodeling, with her building as collateral.
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