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Jackson CPA, LLC has been engaged to perform the 12/31/Y1 audit for JEPAB Inc., an office supply wholesaler, and is performing audit procedures to test whether JEPAB's balances related to the expenditure cycle are correct. Materiality and performance materiality have been set at $75,000 and $50,000, respectively. Test selections chosen by the audit team relate to the purchase of inventory to be sold by JEPAB in the normal course of business. Jackson has confirmed that the trade accounts payable ("A/P") general ledger account reconciliation prepared by the client ties to the general ledger ("G/L") account balance of $386,154 as of 12/31/Y1. The client's account reconciliation is unadjusted for any proposed adjusting journal entries to be made by the auditor resulting from the auditor's fieldwork.
Using the exhibits, perform the following audit procedures:
In Column C, identify the auditor's finding from performing the audit procedure (Column A) on the auditor's test selection (Column B). A selection can be used once, more than once, or not at all.
In Column D, if an adjusting entry is needed to restate the client's A/P balance at 12/31/Y1, select the appropriate accounts to debit (DR) and credit (CR). If no adjusting entry is needed, select "Not applicable."
In Column E, enter the impact to A/P of any proposed audit adjustments identified (Column D).
For proposed adjustments that increase A/P, enter a positive whole number.For proposed adjustments that decrease A/P, enter a negative whole number.If no adjustment is needed, enter a zero (0).
In Row 10, based on the audit work performed and assuming that the auditor's proposed adjustments to the A/P account have not yet been made, form a conclusion on the client's A/P balance. Assume that no further issues or adjustments, including qualitative factors, were identified during the audit of accounts payable.
