Question

Substantive procedures to examine the cutoff assertion for accounts payable include?

1) Selecting a sample of vouchers and agreeing them to authorized purchase orders.
2) Selecting a sample of vouchers and agreeing them to the purchases journal.
3) Selecting a sample of receiving reports around year-end and comparing dates on related vouchers to dates in the purchases journal.
4) Recomputing the mathematical accuracy of a sample of vendor invoices.

Answer 1

Substantive audit procedures for examining the cutoff assertion for accounts payable include agreeing vouchers to purchase orders and the purchases journal, and comparing year-end receiving reports with vouchers and journal dates. These steps assure transactions are recorded in the proper period.

Step-by-step explanation:

The student's question relates to the audit procedures for verifying the cutoff assertion for accounts payable. This assertion is concerned with ensuring that transactions and events have been recorded in the correct accounting period. The substantive procedures to examine this assertion would include:

1. Selecting a sample of vouchers and agreeing them to authorized purchase orders, to verify that the liabilities were recognized when the goods were ordered.
2. Selecting a sample of vouchers and agreeing them to the purchases journal, to confirm that the purchases recorded correspond to the actual liabilities established for goods and services.
3. Selecting a sample of receiving reports around year-end and comparing the dates on related vouchers to dates in the purchases journal, to ensure that the recorded liabilities pertain to goods and services actually received by year-end and are thus relevant to the period under audit.

The fourth option, recomputing the mathematical accuracy of vendor invoices, while important, does not directly address the cutoff assertion; rather, it is more related to the accuracy assertion.