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SacState, CPA, is the auditor of the Salazar Corporation. SacState is considering the audit work to be performed in the accounts payable area for the current year's engagement.
The prior year's workpapers show that confirmation requests were mailed to 100 of Salazar's 1,000 suppliers. The selected suppliers were based on SacState's sample, which was designed to select accounts with large dollar balances. A substantial number of hours were spent by Salazar and SacState resolving relatively minor differences between the confirmation replies and Salazar's accounting records. Alternative auditing procedures were used for those suppliers who did not respond to the confirmation requests.
a. Identify the accounts payable assertions that SacState must consider in determining the substantive procedures to be performed.
b. Identify situations when SacState should use accounts payable confirmations and discuss whether SacState is required to use them.
c. Discuss why the use of large dollar balances as the basis for selecting accounts payable for confirmation might not be the most efficient approach and indicate what more efficient procedures could be followed when selecting accounts payable for confirmation.
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