Earn 4% interest on your cash balance and simplify business spending with corporate cards, accounts payable and expense management software. Automation eliminates manual errors, ensures real-time updates, and simplifies payment tracking. Regardless of the size of your organization or how you structure your accounts payable department (a team, a bookkeeper or an individual company… When you bring in an independent auditor, you don’t have to worry about an existing relationship getting in the way of an accurate AP audit.

A clear audit trail.

Auditors check that all payable balances match the general ledger and tie back to journal entries, purchase orders, and invoices. They want to see a clear trail connecting recorded payables to actual payments, whether electronic or otherwise. Any unmatched or open records are Partnership Accounting flagged for further review, and cutoff tests are often used to ensure transactions are recorded in the correct period. They pull transactions, request a full list of bills, and scrutinize invoices and payments. This comprehensive testing phase is designed to ensure the accuracy and legitimacy of every transaction.

OFF THE LEDGER:

This step ensures that credits are applied accurately and balances are correctly reflected in the accounts payable ledger. Payment records, the essential tool for tracking all completed transactions, provide a sense of security. These documents provide evidence of payments made, including payment dates, methods (e.g., checks or transfers), and amounts. By reviewing these records, auditors ensure all payments are accounted for and match the corresponding invoices and purchase orders. Obviously, the accuracy of a company’s financial records is critical, and an AP audit will look to confirm the accuracy of the AP practices. Auditors will perform several procedures at this stage, including examining the SOP, and recalculation of supplier invoices and payments.

• Once the planning phase is complete, the auditor provides an outline of the intended AP audit process.
• Although compliance creates extra work for businesses, these requirements are intended to prevent corporations from practicing fraudulent financial reporting.
• The audit team will conduct a risk assessment to identify and assess the risks of material misstatement in the financial statements.
• Automation tools can improve efficiency and reduce the risk of errors or fraud through built-in controls and audit trails.
• The report provides a summary, details the areas examined and processes involved, provides feedback and guidelines, and highlights any immediate concerns.

Gather documents with this checklist.

• Whether an AP audit is mandatory or not depends on if your company is public or privately owned.
• It helps ensure financial accuracy and prevent fraud—and, in many cases, it’s required by law.
• If a business pays more than the amount invoiced, it’s considered an overpayment and is documented as a negative liability on the balance sheet.
• By ensuring data integrity across the organization, Stampli makes AP audits and reconciliation easier and more accurate.
• In their report, the ACFE said that more than half (51%) of all fraud cases occurred due to a lack of internal controls or fraudsters overriding existing controls.

Substantive audit procedures for accounts payable may include both substantive analytical procedures and test of details. The nature and extent of both tests are directly related to the level of risk that the client’s accounts CARES Act payable are exposed to. In this case, we can perform this test by reperforming the monthly reconciliation of supplier statements to relevant payables in the accounting record. Inherent risk of accounts payable is the risk that accounts payable may contain material misstatement regardless the related control procedures that the company has in place. In this case, risk of material misstatement for accounts payable is the risk that accounts payable can be materially misstated and the related control procedures cannot prevent or detect such misstatement. More importantly, it gives a business more space to pursue a progressive strategy and plan for future endeavors.

• This slowdown in the audit process increases the risk of oversight and incomplete scrutiny, compromising accuracy and thoroughness.
• When an auditor discovers one or more open invoice, they will reach out a percentage of your business partners too.
• These errors usually happen when there’s a lack of clarity in the AP audit workflow, leading to unnecessary financial losses.
• An AP audit will determine whether a company’s AP process adheres to the strictures of GAAP practices.
• These audits ensure compliance with policies, accuracy in payments and proper record-keeping, safeguarding against financial losses.
• Comparing payable balance at the current year to the previous year is the procedure to test the reasonableness of the changes.

Compliance

Performing an accounts payable audit can be challenging as it requires strong financial knowledge and attention to detail to ensure accuracy. The complexity can increase due to factors such as economic decisions, understanding financial processes, and managing risks. Every action in an automated AP system is recorded, creating a detailed digital accounts payable audit report. Auditors can review the history of approvals, modifications, and transactions, ensuring transparency and accountability.

Generally accepted accounting principles will vary by region, so the first step in planning for an audit is to schedule a meeting ASAP to discuss what you need. Once all fieldwork is complete, the findings are put into a final audit report. Ask questions, provide your perspective, join the conversation, find resources. Using the power of AI, Airbase streamlines expense categorization and matches transactions to the correct accounts, eliminating manual errors. While admins can view user’s details (role, manager, department, subsidiary, and the assigned accounting policy), they can deactivate and reactivate users and delegate approvers.

• Auditors evaluate the effectiveness of these controls, such as the segregation of duties and approval workflows, to prevent fraud or unauthorized transactions.
• Ensure that all transactions are properly recorded and that nothing is missing from your financial records.
• Risks were consistent every year, so audit teams could repeatedly conduct the same audit.
• Automated invoice processing reduces processing errors and fraud and eliminates duplicate invoices.
• We can test them by selecting a sample of payable accounts and agreeing them to the supporting documents such as purchase orders and suppliers’ invoices.

Make AP audits painless with Stampli

In this blog, we’ll explore the essentials of an accounts payable audit, including its importance, key steps, and actionable tips to streamline the process. To prepare for an accounts payable audit, AP teams should consider completing the items on this accounts accounts payable audit payable audit checklist. The heavy lifting of an AP audit is when the auditing team deep dives into AP records and documentation.