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Audit Program

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									Examination of

Audit of                                             Exam Date
                                                                                 Done
                               Audit Procedures                         Period    By


                       Accounts Payable

The primary audit objectives are to determine whether:

    1. Purchased goods and services have been received and are
       for corporate purposes;
    2. Proper distribution of costs to asset, expense, capital, and
       other accounts has been made;
    3. All liabilities for goods and services received are recorded;
    4. Costs and expenses are not misstated by processing errors;
       and
    5. Cash disbursements are valid and have been properly
       approved and recorded.

EXPENSE DISBURSEMENT TEST:

1. Determine the beginning and ending check number of each
   sequence used during the credit period.       Using random
   selection, select a sample of expense checks. For any checks
   selected which were voided, select a replacement but verify the
   check was adequately voided.

2. For the checks selected above, perform the following:

    a. Examine invoices, vouchers, requisitions and/or receiving
       reports supporting the disbursement. Also, compare the
       canceled check to the check copy as to number, date, payee
       and amount.
    b. Determine invoices were properly approved for payment.
    c. Inspect canceled checks for proper authorization signatures
       and endorsements or alterations.
    d. Ascertain that invoices and supporting documentation were
       effectively canceled upon payment.
    e. Trace paid invoices back to purchase orders, if applicable, or
       approved requisitions/check requests and note compliance
       with ordering policy procedures.
    f. Test the mathematical accuracy of purchase orders and/or
       invoices. Determine if any purchase discount was available,
       but not taken.
    g. Test the proper distribution of costs to asset, expense,
       capital and other accounts based upon invoice descriptions,
       purpose and corporate capitalization guidelines.
    h. Trace disbursements to the accounts payable journal and
       check register noting agreement of amount and general
       ledger account distributions.
    i. Trace the daily totals from the accounts payable journal to
       same day posting in the appropriate general ledger accounts
       and trace the credit to the official checks DDA account on
       date of disbursement.
    j. Determine that G/L entries require supervisory approvals
       prior to processing. Test compliance by tracing a few
       disbursements to the processed G/L tickets in file.
    k. Investigate disbursements of a non recurring type or of an
       unusual nature.

3. Observe, on several days selected at random during the field
   work, whether paid invoices and approved check copies are
   reviewed by a person independent of the Accounts Payable
   Department.

4. Observe, on several days selected at random during the field
   work, whether an independent verification is made to account for
   all manual checks used each day via usage of signature
   machine compared with check copies. Consider inspecting and
   testing the records of the independent verifier.

5. For periods not selected for detailed testing, scan voucher and
   check register for unusual items and investigate.



                                                1
Examination of

Audit of                                              Exam Date
                                                                                  Done
                               Audit Procedures                          Period    By




TEST OF T & E REPORT:

6. Select bank officers from various departments and obtain all time
   and expense reports for them during the audit period. While
   performing the following procedures, be alert as to any policies
   which management might implement to reduce expenses of the
   Bank.

    a. Determine all expenses are adequately supported with
       receipts, etc.
    b. Test the mathematical accuracy of the report.
    c. Determine adequate approval was obtained of department
       head and other required officers.
    d. Review T & E reports for the reasonableness of expenses.
       Also, determine the amount spent by officers on in-town
       meals - when customers are not being entertained.
    e. Test for compliance with travel and entertainment
       requirements under new tax laws regarding support,
       deductibility, etc.
    f. Trace the reimbursement for personal expenses to check
       copy received from officer. Also, review club membership
       bills, etc., for expenses by these officers which would not
       appear on their expense reports.

7. Test validity of general ledger A/C balance to underlying
   documents by obtaining open invoice file and comparing those
   unpaid invoices with the vouchers payable by vendor report. For
   A/C examine automated check copies and trace to debit entry in
   the account on the next business day. (It is possible that two or
   more days check and vendor register totals will be needed to
   balance the account.)

8. Examine any open invoice file and compare those unpaid
   invoices with the requisitions. Note any unusual or large open
   invoices.

9. Examine any open purchase orders and review for unusual or
   large open purchases. Inspect for unrecorded liabilities of a
   material amount.

10. Consider sending fictitious invoice to accounts payable to
    determine if it will go through the approval process "undetected".

11. If considered necessary, test principal accounts for fictitious
    suppliers and addresses by reference to independent sources
    (e.g., telephone directories, Dun and Bradstreet, etc.).

12. Review A/P reconcilement for most recent month-end prior to
    audit dates.
a. Note agreement of amounts to journal and G/L,
b. Determine that reconcilement complies with reconcilement policy
    (prepares initials, dated, reviews initials, etc.)

13. Review procedures for the Accounts Payable G/L account
    reconcilement's.

14. Test a sample of reconcilement's prepared during the audit
    period for compliance with internal control procedures.
    a. Prepare initials and date reconciliation prepared.
    b. Appropriate reviews initials.
    c. Adequate description on reconciling items.
    d. No reconciling items older then allowed by policy.




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