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MBA (IT), PHD
Kaplan University
Apr-2009 - Mar-2014
Professor
University of Santo Tomas
Aug-2006 - Present
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. Â Â Â Â Â Â Â Â Â Â Â Â Â 22,650 Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 46,100
Landon Co. Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 65,000 Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 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.
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