Audit Procedures For Accounts Payable
Audit Procedures For Accounts Payable
Completeness
To test the completeness assertion and confirm that all accounts payable –
trade, including all the transactions that had transpired during the year, are
recorded and reflected in the balance sheet portion of the financial
statements.
Investigate any supplier names that were shown on last year's payables
listing but do not have a balance showing in this year's list of balances
Review after date invoices and payments and ensure they have been
provided for at the yearend as appropriate
Analytical review
Calculate the trade payables payment period and compare to last year
to assess reasonableness
Example: Obtain accounts payable listing the client and perform casting and
cross-casting to the general ledger to ensure their balances are matched.
Select a sample of suppliers’ statements and reconcile them to the
accounting records.
Test for unrecorded liabilities by examining the transactions after year-end
and those of unrecorded invoices.
*Usually, by performing the reconciliation of suppliers’ statements, we can ensure
the assertions of completeness, existence, and valuation.
Existence
To test the existence assertion to ensure that the accounts payable balance
shown on the balance sheet really exists at the reporting date.
Example:
Select a sample of payable accounts and vouch them to the supporting
documents, such as purchase orders and suppliers’ invoices.
Select a sample of payable accounts and reconcile them to the suppliers’
statements
Perform accounts payable confirmation on a sample of suppliers
Valuation
To test the valuation assertion to ensure that the payable balances are
mathematically correct, to make sure that payable balances are accurate.
To test the right and obligation assertion to see whether the client actually has
liability for accounts payable reported