AUDPRO1

AUDIT OF FINANCING AND INVESTING CYCLE

Class Activity

For each of the following Internal Control Questionnaire items for notes payable, identify:
a. the purpose of the control
b. a potential financial statement error that could occur if the control were not in effect, and
c. an audit procedure that can be performed to determine whether the control/misstatement
exists

1. Are liabilities for notes payable incurred only after written authorization by a proper company
official?

2. Are paid notes cancelled and retained in the company files?

3. Are interest expense and accrued interest recomputed periodically by an individual who does not
record interest transactions?

4. Is a notes payable master file maintained?