What is Search for unrecorded liabilities?
In short
The search for unrecorded liabilities is a set of procedures that test the completeness of liabilities, chiefly by examining cash payments and unpaid invoices after year-end to find obligations that existed at the balance sheet date.
Key takeaways
- It traces from source documents to the records, so it tests completeness, the main risk for liabilities.
- Receiving reports dated before year-end are matched to recorded payables.
- Confirmations with suppliers who show a zero balance can also find unrecorded amounts.
Where it's tested
AUD: Responding to Assessed Risks — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
An auditor assesses control risk as very low for the revenue cycle after successfully testing controls. Which statement is correct regarding substantive procedures for revenue?