 in this presentation we will take a look at the auditing process for auditing accounts payable focusing in on accrued expenses accrued expenses so here's going to be our assertions that we're focusing in on existence being the first assertion first a word from our sponsor well actually these are just items that we picked from the youtube shopping affiliate program but that's actually good for you because these aren't things that were just given to us from some large corporation which we don't even use in exchange for us selling them to you these are things that we actually researched purchase and use ourselves here we have a western digital wd elements 20 terabyte usb 3.0 desktop external hard drive we use as part of our backup system noting that if you lower the number of terabytes of storage the price will lower dramatically as well when you're thinking about a backup system you usually think about an online system or an external hard drive system like this or ideally some combination between the two given you some redundancy you can also work directly from an external hard drive like this but there are some drawbacks to doing that one being if you use this as your primary drive you're working from it's no longer a backup drive and you're going to need a backup system possibly another external hard drive and or some kind of cloud backup system and if you're working on something that takes up a lot of short-term memory a lot of ram as you're working on it such as video editing the external hard drive can slow up the system so you might want to come up with some kind of system where you download the project you're working on to your computer to your c drive or possibly to a solid state drive which is a much more expensive external hard drive as you do the work once the work is done then save the project to an external hard drive such as this if you would like a commercial free experience consider subscribing to our website at accounting instruction dot com or accounting instruction dot think of it dot com where we have many different courses you can purchase one at a time or have a subscription model giving you access to all the courses courses which are well organized have other resources like excel files and pdf files to download and no commercials accounts payable and accrued expenses are valid liabilities so that's what we're thinking about in terms of existence are they valid rights and obligations with regard to accrued expenses accounts payable and accrued expenses are obligations of the entity so we want to be able to say that they are for the entity these accrued expenses completeness the assertion of completeness all accounts payable and accrued expenses have been recorded all related disclosures that have that should have been included in the financial statements have been included then we have accuracy valuation and allocation as the assertion accounts payable and accrued expenses are included in the financial statements at correct amounts any valuation or allocation adjustments have been recorded related disclosures have been measured and described then we have the assertion of classification all accounts payable and accrued expenses are recorded in the correct account then the assertion of presentation accounts payable and accrued expenses are correctly aggregated or disaggregated and clearly described related disclosures are relevant and understandable now we're going to discuss the substantive analytical procedures so substantive analytical procedures so we're on the substantive procedures but these are those analytical ones the ones that we can do in the office to comparison the auditor's office I would consider they comparison the ratio analysis type of activities so we can compare the payables turnover and days outstanding in accounts payable to the previous years and industry data the possible misstatement we would detect under or over statement of liabilities and expenses the substantive analytical procedure then we can do compare current year balances in accounts payable and accruals with the prior prior years balances obviously this will be a common procedure we'll do we'll compare the current year to the prior year that what we're going to detect under or over statement of liabilities and expenditures so any kind of unusual activity from year over year comparison is something we might look into then the next substantive analytical procedure compare amounts owed to individual vendors in the current year's accounts payable listing to amounts owed in prior years what we want might detect under or over statement of liabilities and expenses next substantive analytical procedure compare purchase return to an allowances as a percentage of revenue or cost of sales to prior years and industry data possible misstatement to detect under or over statement of purchase returns next substantive analytical procedure predict accrued interest expense based on loan terms and the outstanding balance possible misstatement to detect under statement of accrued interest