VIEWS: 94 PAGES: 8 POSTED ON: 4/1/2009
AUDIT PROGRAM TRADE ACCOUNTS PAYABLE OVERVIEW Test Detailed Trade Accounts Payable Listing Obtain or prepare a comparative summary (1). Obtain a detailed listing of accounts payable (2). Evaluate reconciling items (3). Scan detailed list of accounts payable (4). Test mathematical accuracy of detailed listing (5). Examine adjustments made throughout the period (6). Trace amounts on listing to supporting documentation (7). Test accuracy of supporting documentation (8). Confirm selected balances (9-11). Establish Proper Cutoff Inquire about unrecorded liabilities (12). Identify and test the division's cutoff procedures (13). Examine disbursements records after balance sheet date (14). Examine files of unmatched receiving reports or invoices (15). Review fluctuations in purchases or returns near period-end (16). Additional Procedures Obtain information for disclosure (17). Perform procedures when early tests are performed (18). Test translation of amounts recorded in foreign currencies (19). Identify trade accounts payable replaced with notes (20). Assess potential losses from open purchase commitments (21). AUDIT PROGRAM TRADE ACCOUNTS PAYABLE GUIDANCE Accounts payable include liabilities for which invoices have been received and liabilities for goods and services received that have not been matched with the related invoices. Completeness and cutoff are generally high-risk objectives, and existence is generally a low-risk objective for accounts payable. The valuation objective does not apply to trade accounts payable; however, when appropriate, the auditor should estimate potential losses from open purchase commitments. The auditor should obtain an understanding of the significant types of purchase transactions and the monetary volume of transactions flowing through the account. Particular consideration should be given to the consistent and appropriate accounting treatment of special transactions such as volume rebates from suppliers, interest on overdue liabilities, balances not due within 12 months and purchase transactions subject to reservation of title. When appropriate, substantive tests should be developed for these types of transactions to provide the necessary assurance about each relevant audit objective. When preparing this program the auditor should consider and design audit procedures that address relevant presentation and disclosure requirements. AUDIT PROGRAM TRADE ACCOUNTS PAYABLE Test Detailed Trade Accounts Payable Listing OBTAIN OR PREPARE A COMPARATIVE SUMMARY (1). 1. Obtain or prepare a comparative summary of trade accounts payable balances. Trace totals to the general ledger and the previous audit's working papers. Done by Date ..../../.. OBTAIN A DETAILED LISTING OF ACCOUNTS PAYABLE (2). 2. Obtain or prepare a detailed listing of trade accounts payable balances by supplier and trace totals to the summary obtained in step 1. Done by Date ..../../.. GUIDANCE: The detailed list of trade accounts payable usually represents the division's detailed records and should include liabilities for goods and services received but not yet invoiced. If the detailed listing is derived separately from the detailed records (usually in manual systems), the auditor should prove the accuracy of the detailed listing by tracing amounts, on a test basis, to and from the detailed records and the detailed listing. EVALUATE RECONCILING ITEMS (3). 3. Determine the propriety of all reconciling items between the summary and the detailed listing, through inquiry and examination. Done by Date ..../../.. SCAN DETAILED LIST OF ACCOUNTS PAYABLE (4). 4. Scan the detailed listing of accounts payable and investigate significant unusual items (e.g., debit balances and old unpaid invoices). Done by Date ..../../.. GUIDANCE: When scanning the detailed list of trade accounts payable, the auditor should be alert for audit risks contained in the accounts. For example, the existence of old unpaid invoices or uncleared debit advices may indicate disputes with suppliers or the inclusion of invalid invoices. The existence of debit balances may indicate duplicate invoice payments, unrecorded purchases or possible unusual transactions, and the auditor may need to reclassify recoverable amounts in the financial statements. Therefore, the auditor may consider it necessary to review debit balances to determine their cause for possible reporting to management, even though the volumes and amounts are not significant. TEST MATHEMATICAL ACCURACY OF DETAILED LISTING (5). 5. Test the mathematical accuracy of the detailed listing. Done by Date ..../../.. EXAMINE ADJUSTMENTS MADE THROUGHOUT THE PERIOD (6). 6. the Examine support for any significant adjustments made throughout period by the division in reconciling detailed accounts payable records with the control account(s) in the general ledger. Done by Date ..../../.. GUIDANCE: The purpose of this step is to determine whether adjusting entries resulting from the reconciliations are properly authorized and posted to the control account and are not fictitious. When performing this step the auditor should be aware that, in some divisions, entries to the control account may be numerous and it is not necessary to review all of them. Attention should be focused on those entries arising from the reconciliation process by reviewing the division's reconciliations, identifying unusual adjustments, reviewing authorizations (when appropriate) and agreeing the adjustments to supporting documentation and the general ledger. TRACE AMOUNTS ON LISTING TO SUPPORTING DOCUMENTATION (7). 7. orders, supplier statements) to determine the accuracy of the listing. Done by Date ..../../.. GUIDANCE: This test requires a decision on the extent of testing. The auditor should use judgment in determining the extent of tests after considering factors such as secondary assurance expected from other substantive tests Trace selected recorded liabilities on the listing to supporting documentation (e.g., invoices, receiving reports, purchase (e.g., cutoff tests); the type and frequency of errors in prior periods; use of financial information by management, employees and third parties; and the results of analytical procedures. This test should be coordinated with other tests of details, steps 9 to 11 relating to confirmation of accounts payable and steps 14 and 15 relating to the cutoff objective, when those steps are planned. TEST ACCURACY OF SUPPORTING DOCUMENTATION (8). 8. by comparison with priced purchase orders, suppliers' price lists, earlier invoices for identical goods, standard costs, or other suitable evidence. Done by Date ..../../.. Test extensions and postings on the supporting documentation. If invoices have not been received, the liability may be determined Establish Proper Cutoff INQUIRE ABOUT UNRECORDED LIABILITIES (12). 12. yet received under a "take or pay" contract. the business, industry and major suppliers of goods and services not part of normal business. Done by Date ..../../.. GUIDANCE: The auditor should always make inquiries of management about potential sources of unrecorded liabilities and judge those responses in the light Consider the nature of Inquire about potential sources of unrecorded liabilities, for example, inventory that has been received at public warehouses or other remote locations or an obligation to pay for inventory not of knowledge of the division's operations, assessments of control risk and the results of other audit procedures (steps 7 to 11 for accuracy and existence, if these tests are performed). IDENTIFY AND TEST THE DIVISION'S CUTOFF PROCEDURES (13). 13. cutoff Identify and test the adequacy of division's procedures for of period-end accounts payable. Done by Date ..../../.. EXAMINE DISBURSEMENTS RECORDS AFTER BALANCE SHEET DATE (14). 14. sheet Examine disbursements records for the period after the balance date. Determine whether selected invoices, debit (credit) memoranda, or other items identified in the disbursement records relate to the period before the balance sheet date and should be recorded in the accounts. Done by Date ..../../.. GUIDANCE: Steps 14 and 15 require a decision on the extent of tests. In determining the extent of tests the auditor should consider the reliability of the accounting system and internal accounting controls (e.g., a favorable assessment of completeness controls increases the reliability of the records used in step 15), the results of other substantive tests, the type and frequency of errors in prior periods and the effectiveness of the control environment. EXAMINE FILES OF UNMATCHED RECEIVING REPORTS OR INVOICES (15). 15. unpaid Examine files of unmatched receiving reports or unmatched or vendor invoices, files of pending claims and credits for returned goods to determine if the liability for goods and services received and credit for valid claims and returns made before the balance sheet date is properly recorded. Done by Date ..../../.. REVIEW FLUCTUATIONS IN PURCHASES OR RETURNS NEAR PERIOD-END (16). 16. that patterns before and after period-end and, if present, review for possible cutoff errors. Done by Date ..../../.. GUIDANCE: In designing this test the auditor should be aware of key performance indicators and other management information identified in the assessment of the control environment that may be reviewed for evidence of proper cutoff. Consider key performance indicators and management information would indicate unusual fluctuations in purchases or return Additional Procedures ASSESS POTENTIAL LOSSES FROM OPEN PURCHASE COMMITMENTS (21). 21. losses by inquiry of management, reference to contractual arrangements and examination of purchase and receiving files. provision for loss should be made. Determine whether If material losses could arise from open purchase commitments, assess whether a provision should be made for such potential Done by Date ..../../..
Pages to are hidden for
"Accounts Payable"Please download to view full document