homework

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

confi rm? 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 confi rm? Explain your choice.