Response to the following :
James Rowe, CPA, is the independent auditor of Raleigh Corporation. Rowe is considering the audit work to be performed in the accounts payable area for the current year's engagement. The prior year's working papers show the confirmation requests were mailed to 100 of Raleigh's 1,000 supplies. The selected suppliers were based on Rowe's sample that was designed to select accounts with large dollar balances. A substantial number of hours were spent by Raleigh employees and by Rowe resolving relatively minor differences between the confirmation replies and Raleigh's accounting records. Alternative audit procedures were used for those supplies that did not respond to the confirmation requests.
Required:
a. Identify the accounts payable audit objectives the Rowe must consider in determining the audit procedures to be followed.
b. Identity situations in which Rowe should use accounts payable confirmations and discuss whether Rowe is required to use them.
c. Discussion 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.
Chapter-Debt and Equity Capital
Stan Jones, CPA, the continuing auditor of Sussex, Inc. is beginning the audit of the common stock and treasury stock accounts. Jones has decided to design substantive procedures with the risk of material misstatement specified at a high level. Sussex has no par, no stated value common stock and acts as its own registrar and transfer agent. During the past year Sussex both issued and reacquired shares of its own common stock, some of which the company still owned at year-end. Additional common stock transactions occurred among the shareholders during the year. Common stock transactions can be traced to individual shareholders' accounts in a subsidiary ledger and to a stock certificate book. The company has not paid cash or stock dividends. There are no other classes of stock, stock rights, warrants, or option plans
Required:
What substantive audit procedures should Jones apply in examining the common stock and treasury stock accounts?