EarthWear Hands-on Mini-case

Search for Unrecorded Liabilities

In this mini-case you will focus on performing one aspect of the test of details on the accounts payable
balance – the search for unrecorded liabilities. To identify possible unrecorded liabilities you will compare
the payments made after year end with the accounts payable listing as of the end of the year. In performing
this comparison particular attention should be given to any payment made on the disbursements journal for
which there was not an accounts payable balance as of year end. Your responsibility is to identify the
transactions on the cash disbursements journal that the audit team should investigate and review further to
determine if a liability should have been recorded as of year end.

INSTRUCTIONS:

1 Work paper 7-2 contains a listing of the cash disbursement journal entries made in the first few days of the
following year end. Compare the transactions on the cash disbursements journal with the accounts payable
listing on work paper 7-1. Use the appropriate tick mark to evidence your review of each transaction.

Fields you are to complete are colored yellow. The color will disappear as the field is completed.

When you are finished reviewing the transactions on work paper 7-2, enter your initials in the yellow box
2 with title "Initial Here."

On the worksheet labeled "Evaluation", provide the reason why you identified each transaction for
3 additional investigation and review by the audit team.
 Please print a hard copy of the Evaluation worksheet and Work Paper 7-2 for submission. The work papers
4 are formatted to fit on one page.
Name:

Class:
EARTHWEAR CLOTHIERS 7-1
Accounts Payable Listing SAA
December 31, 2019 1/12/2020

Vendor Name Amount Due

Aarhus Industries $ 94,840
Alpas Cashmere 34,522
American Apparel 25,407 † V
Anderson Clothes, Inc. 345,392
Apparel Concepts 434,032 † V
Asian Textile Resource Group 25,646,163 † V
C&S Manufacturing Inc. 134,043
CDSB Retail 1,538,902 † V
Chami Design Inc. 342,340
Chief Jack International 112,034
Deguire Halden Equipment Leasing 3,475,452 † V
Europe By Post Distribution Services 774,892
Fairway Corporation Ltd. 87,232 † V
Fashion & Craft 23,452
Industria Americana, Ltda. 14,292,301 † V
Mail Works 823,343
Mauler Creations 990,822
Mountain West Properties Group 987,480
MS Leather Factory 40,501 † V
National Retail Leaseholdings 1,839,024 † V
Southside Apparel 345,346
Stephenson Promotion 69,291
Texwin Pacific Ltd. 105,021 † V
Warehouse Solutions Leasing 1,334,921 † V
Washington Mfg., Inc. 234,802
Western Wear Textiles 45,475
Zantec Bros. 8,920 † V
$ 54,185,950
F T/B
LEGEND
F = Footed.
† = Traced to accounts payable subsidiary records.
V = Voucher packets examined for transaction validity. No exceptions.
T/B = Agreed to trial balance.
Name:

Class:
EARTHWEAR CLOTHIERS 7-2
Excerpt from EarthWear Cash Disbursements Journal SAA / Sonia Yeung
1/12/2020
CASH DISBURSEMENTS JOURNAL
from 1/1/2020 through 1/11/2020

Check(C)/W
Date ire(W) # Voucher# Description Payee G/L Account # Cash
1/1/2020 W:1863 195948 Inventory PO# 627-2561-1818 Apparel Concepts 12087-25201-5608971-113 254,032 Δ
1/1/2020 C:57698 195949 Inventory PO# 627-2561-1821 American Apparel 11023-25201-1435149-881 25,407 Φ
1/2/2020 W:1864 195950 Inventory PO# 627-2561-1822 Texwin Pacific Ltd. 15237-56213-8146523-300 105,021 Φ
1/3/2020 C:57699 520444 Building Supply Lewis Hardware 33000-91200-1253000-100 20,536 Δ
1/3/2020 C:57700 195951 Inventory PO# 627-2561-1823 MS Leather Factory 11023-25750-4152610-108 40,501 Φ
1/4/2020 C:57701 265152 Advertising Stephenson Promotion 55126-11592-1001220-100 157,206 Δ
1/7/2020 C:57702 195952 Inventory PO# 627-2561-1825 C&S Manufacturing Inc. 11023-25201-4441563-656 134,043 Φ
1/9/2020 C:57703 375929 Utilities Intermountain Gas 99000-61000-1642000-100 37,554 Δ
January Totals to Date $494,861
FS
LEGEND
F = Footed.
S = Scanned and Reviewed.
Φ = Traced to December Accounts Payable Listing.
Δ = Flagged for further inquiriy and review.
 EARTHWEAR CLOTHIERS Name: Sonia Yeung
Search For Unrecorded Liabilities Class or Section: Section 1
December 31, 2019 Date: 3/25/2021

Transactions identified for further inquiry and review

Reasoning for transactions selected for further inquiry and review
(Transactions will populate below as you complete Workpaper 11-2)

Apparel Concepts Inventory PO# 627-2561-1818 Vendor payment on cash disbursements journal does not tie to balance on accounts payable listing.

Lewis Hardware Building Supply Vendor payment on cash disbursements journal does not appear on accounts payable listing.

Stephenson Promotion Advertising Vendor payment on cash disbursements journal exceeds balance on accounts payable listing.

Intermountain Gas Utilities Vendor payment on cash disbursements journal does not appear on accounts payable listing.

Select the reason that best describes why you have selected this transaction.

Select the reason that best describes why you have selected this transaction.

Select the reason that best describes why you have selected this transaction.

Select the reason that best describes why you have selected this transaction.

© The McGraw-Hill Companies, Inc., 2019