In searching for unrecorded liabilities, the purpose of the audit procedure to "examine underlying documentation for subsequent cash disbursements" is to
A) uncover liabilities on the balance sheet which should not have been recorded until a subsequent period.
B) find the documentation relating to a cash disbursement.
C) uncover payments made in a subsequent accounting period for liabilities that existed at the balance sheet date.
D) uncover cash disbursements recorded in a subsequent accounting period which should be recorded in this period.

Question

Quizplus · Accepted Answer

By examining the underlying documentation for subsequent cash disbursements, auditors can determine if there were any payments made in a subsequent accounting period for liabilities that existed at the balance sheet date, which would indicate unrecorded liabilities. This procedure helps the auditor to ensure that all liabilities are recorded in the correct period and not delayed to a subsequent period.

In Searching for Unrecorded Liabilities, the Purpose of the Audit