 In this presentation, we will take a look at tests of details transactions related to the accounts payable cycle. So the accounts payable cycle test of details transactions, looking at the assertion of completeness, assertion of completion. The auditor should conduct a search of unrecorded liabilities that include the following. So completeness of course being that assertion that we want to make sure that everything that should have been recorded is recorded. In other words, are the end results done in the financial statements? Is everything on the financial statements? Are they complete? In other words, are there transactions that have happened that are not reflected in the financial statements in the end result? So how do we test for this? Inquirer management about control activities designed to identify unrecorded liabilities and accruals at the end of the accounting period. The controls would be part of the closing process. Vouch large dollar items from the purchases journal and cash disbursements journal for a period of time after year end. Now remember what we have here is after year end because we're doing the audit as of the let's say 1231 the year in let's say is 1231. Of course, we are doing the audit at some point after that point in time. So if we're testing something, we can actually take a look at some of the transactions that happen after the year has closed and use them as part of our testing process, examine the data on each receiving report of vendor invoice to see if the liability relates to the current audit period. So we're going to take the information and we're going to look at the data that should be used in order to determine when something should be recorded. In this case, that being the receiving report. Why? Because the receiving reports usually going to be that item before talking about purchases that we actually received the item. So we want to see if that's the point in time that the item was actually put on the books. Was it put on the books in the correct time period? It should be put on the books in accordance with the receiving reports. We want to see what's the triggering factor as to when the items going to be put on the books in the accounting system and then basically double check those and we can do that by looking at some of the transactions after the end of the time period and checking to see if it has indeed been recorded at the time period it should have. That being the time period the receiving report happened. We want to examine files of unmatched purchase orders receiving reports and vendor invoices for in any unrecorded liability. Next assertion related to test of details of transactions is existence with existence. Auditors primary worry is whether the recorded liabilities are valid obligations of the entity. So the recorded liability on the books are they valid liabilities of the entity. Now again you would think that with regards to liabilities they wouldn't overstate the liabilities but that's basically what we're testing for with regards to existence because you would think if they were overstating liabilities they wouldn't typically do that intentionally. It might be an error possibly to overstate the liabilities but you would think that you wouldn't intentionally overstate the liabilities usually because that would make you look worse. The only time that that might happen generally is if there's something for tax reasons or something like that but typically we would think that if there was going to be some type of intentional misstatement they would usually be trying to look better not not worse. Auditors should vouch a sample of items on the listing of accounts payable to the supporting documentation. So we're going to take the information from the end result then existence we're talking about here and then we're going to vouch it back to the source documentation and that'll help us to be able to see if the end result what's on the books actually happened. So we're going to take the end result and then go back to the past. Next we have the assertion with relation to the test of details of the cutoff. So recall that the cutoff is typically going to be that year-end type of information or things properly recorded in the proper time period. Auditor will try to determine if all purchase transactions are recorded in the correct period. For most audits the purchase cutoff line up with the entity's physical inventory count. So we're going to basically line this up when we're going to do it with the physical inventory count and that will typically happen somewhere close to basically the year-end so that we can check that the physical inventory what's on the books as we go out and check the physical inventory is indeed present at that point in time. Proper cutoff should also be determined for purchase return transactions so we also want to consider the cutoff with regards to purchase returns. Next we'll take a look at test of details transactions with regards to rights and obligations, the assertion of rights and obligations. The risk is small related to this assertion because entities generally do not have an incentive to record liabilities that are not obligations of the entity. So usually when we're considering the rights and obligations with regards to liabilities again the assertion normally the company wouldn't try to look worse most of the time and therefore it's not an assertion that's as high of a priority with regards to liabilities typically. Next we're going to take a look at the assertion of accuracy, valuation and allocation. Accounts payable should be recorded at either the gross amount of the invoice or net of the cash disbursement amount. Valuation of accruals depends on the type and nature of the accrued expenses most accruals are fairly easy to value. Next we'll take a look at the assertion of classification. The primary issues with regards to classifications with the test of details of transactions are find and reclassify any material debits contained in accounts payable. So we're going to go through the accounts payable the detail of accounts payable if there are debit balances in the accounts payable balances then it shouldn't be the case that we should have a debit balance in accounts payable something kind of funny possibly happened at that point in time and we'd want to remove any debit balances in the accounts payable. Now there could be an accounts a debit balance if there is some kind of policy so for example if we purchase something and we typically put like a down payment on the purchase of something before we receive it it could be possible that the system then has been set up that we put that into a negative payable meaning we would kind of have a negative payable to the to the vendor why would we do that because the accounting system makes it a little bit easier to do it could make it a little bit easier to track by vendor what is owed to the vendor instead of putting it into into basically an advanced an advanced payment so instead of putting it into an asset in other words of an advanced payment before we receive the the goods whether it be inventory or some other type of asset we put it in as a negative liability because it's going to match up once we received the goods that we were going to receive and the system will make it a little bit easier for us to do that with regards to the matching up process of the vendors so if we if that is the case and we would probably want