Audit Procedures for Accounts Payable

Substantive audit procedures for accounts payable may include both

substantive analytical procedures and test of details.

Test of Details in Audit of 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.

 Trace a sample of vouchers to the purchases journal (On Classes of

Transactions – Completeness)

 On Account Balances - Completeness

 Obtain listing of accounts payable and agree total to general ledger.

 Search for unrecorded liabilities by inquiring of management and examining post-

balance sheet transactions.

 Obtain selected vendors' statements and reconcile to vendor accounts.

 Confirmation of selected accounts payable.

 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.

 Selecting a sample of payable accounts and agreeing them to the

supporting documents such as purchase orders and suppliers’ invoices
 Perform reconciliation between a sample of suppliers’ statements and
payable accounts also ensure valuation.

Rights and obligation

To test the right and obligation assertion to see whether the client actually has
liability for accounts payable reported

 Vouching a sample of payable accounts to supporting documents.

 Examine the long-term contracts that the client has with its suppliers. Client
may have an agreement to purchase the goods from suppliers at a specific
price.