In: Accounting
1) If you were auditing Accounts Payable at a service firm, which assertion/s would be most at risk of misstatement, and why?
2) Explain how different groups of users of the financial statements may use the audit report for different objectives or purposes?
2) | Users of Financial Statements | Purpose/ Objective of Financial statements |
Suppliers | To analyze the company's ability to repay | |
Stockholders | The decision of retaining or selling their stock in a particular company | |
Investors | To know the Company's potentiality to repay. Their profitability, return on the investment in the business and whether to continue or not. | |
Lenders | To analyze the company's ability to repay | |
Employees | To know the company's stability, functioning, payroll processing in time and to develop their career | |
Customers | They are the purpose of the business. To see the company's operations, customer-centric or not. | |
The Government | For tax-related purposes. | |
General Public | For outsiders to decide to have a relationship with the company | |
Management | For the daily functioning of the business, their budgeting purpose, funding decisions etc.. |
1) | Accounts Payable Assertions | |
Existence | ||
Completeness | ||
Cutoff | ||
Existence would be at more risk because | ||
There are chances of duplicate invoices or payments involved. |