Assignment
As part of your fi rst audit of the fi nancial statements of Marina del Rey, Inc., you have decided to confi rm some of the accounts payable. You are now in the process of selecting the individual companies to whom you will send accounts payable confi rmation requests. Among the accounts payable you are considering are the following:
Company Amount Payable at Year-End Total Purchases from Vendor during Year
Dayco, Inc. $ - $1,980,000
Gearbox, Inc. 22,650 46,100
Landon Co. 65,000 75,000
Western Supply 190,000 2,123,000
a. Which two of the above four accounts payable would you select as the most important to confirm? Explain your choice in terms of the audit objectives in sending accounts payable confi rmation requests.
b. Assume that you are selecting accounts receivable to be confi rmed. Assume also that the four companies listed above are customers of your client rather than suppliers and that the dollar amounts are accounts receivable balances and total sales for the year. Which two companies would you select as the most important to confirm? Explain your choice.