Once the auditor has a solid understanding of the company’s purchasing the process, the auditor can identify significant accounts in the purchasing process and relevant assertions. Significant accounts for the purchasing process can include accounts payable, accrued expenses, and many of the expenses that appear on the income statement. The auditor should also examine transactions that affect accounts payable, such as purchase transactions and cash disbursement transactions. With respect to accounts payable, management is asserting that: • Liabilities represent actual obligations of the company (existence) • All liabilities and related expenses or assets have been recorded (completeness) • All liabilities and related expenses or assets have been recorded in the correct period (cutoff) • All liabilities and related expenses or assets have been recorded for the correct amount (valuation) • Expenses have been recorded in the correct account (classification) Completeness is one of the most important assertions for accounts payable. …
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