ACCT XXXXXXXXXXS1 Mini Audit Assignment Bliss Fragrance Ltd Questions final
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Question 3: Substantive procedures on accounting payables XXXXXXXXXXmarks)
One of the substantive procedures for auditing accounts payable is to agree suppliers’ statement to the
purchase ledger. A junior member of the audit team has been checking a statement from Cypress against
purchase ledger. However, he is unable to reconcile a material difference relating to Cypress Ltd, and has
asked for your help and suggestions on the audit procedures that should be ca
ied out to verify the
differences.
As mentioned in the background information of BF, Cypress allows BF 90 days term to pay for inventory
purchases, but offers 7% discount if BF pays by the end of the month following the date of the invoice
(i.e. a 7% discount will be given on November invoices paid by 31 December). Miller chose to take the
discount to maximise profit margin.
Note: the balance of Cypress Ltd in BF’s purchases ledger is shown opposite.
Bliss fragrance Ltd
Purchase ledger sorted by suppliers
Supplier Cypress products
Date Type Reference Dr Cr Balance Status
3-Oct Invoice 3695
2,530
Paid 1
17-Oct Invoice 3698
3,600
Paid 1
25-Oct Invoice 3704
2,640
Paid 1
4-Nov Invoice 3710
3,564
Paid 2
13-Nov Invoice 3722
1,850
Paid 2
22-Nov Invoice 3730
960
Paid 2
30-Nov Payment ACB3679 8,156
Allocate 1
Discount ACB XXXXXXXXXX
Allocate 1
8-Dec Invoice 3742
3,790
Unpaid
15-Dec Invoice 3751
4,500
Unpaid
30-Dec Payment ACB3685 5,928
Allocate 2
Discount ACB XXXXXXXXXX
Allocate 2
30-Dec Balance
XXXXXXXXXX,290
Cypress Product Ltd
Statement from 1 Oct - 31 Dec 2016
Customer Bliss fragrance Ltd
Date Type Reference Dr Cr Balance Status
5-Oct Invoice 3695 2,530
eceived
14-Oct Invoice 3698 3,600
eceived
28-Oct Invoice 3704 2,640
eceived
6-Nov Invoice 3710 3,546
outstanding
16-Nov Invoice 3722 1,850
outstanding
24-Nov Invoice XXXXXXXXXX
outstanding
2-Dec Payment ACB3679
8,156
5-Dec Invoice 3740 4,735
outstanding
8-Dec Invoice 3742 3,790
outstanding
15-Dec Invoice 3751 4,500
outstanding
30-Dec Invoice 3755 6,298
outstanding
30-Dec Balance
26,293
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Required:
4) Prepare a reconciliation between the BF’s purchase ledger and the supplier statement from
Cypress Products. XXXXXXXXXX5 marks)
5) Describe the audit procedures to verify each of the difference between BF and Cypress. (10 marks)
6) Explain the rationale for your selection of the suppliers to send confirmation. (5 marks)
7) Describe the audit procedures you would perform to verify BF’s unrecorded liabilities. (5 marks)
The End