L – FURNIZORI / Suppliers

Done/ No/

paper ref.
Not appl.
Working
Task description

1. Risk/control issues
What would prevent staff from introducing false invoices into the system and these being subsequently paid?
What prevents invoices from being paid more than once?
Are invoice payments only made to valid and approved suppliers?
Are all invoices subject to authorization at the appropriate management level prior to payment and how is this process evidenced?
Is there adequate segregation applied between those originating purchase orders and those authorizing the relevant invoice for
payment?
Are cheque or other methods of payment confirmed as correct and suitably authorized by an appropriate official before release?
Are invoice payments made at the appropriate time (i.e. avoiding either premature or overdue payment)?
2. Agree detailed listing of accounts receivable to the trial balance (C, A, E)
Obtain a list with all accounts payable balances (aged by vendor if possible), check the mathematical accuracy of the total and
trace the total against the trial balance.
Scan the detailed listing of accounts receivable and investigate significant or unusual items (e.g. debit balances, large balances,
old unpaid invoices).
3. Perform substantive analytical procedures (C, A, O, CO, V)
Develop an expectation, based on appropriate data. Assess the reliability of the data, considering the extent of comfort from
controls. Determine the variation amount of % (threshold) to be used in the investigation of differences from expectations.
Compute the differences between recorded amounts and the expectations. Investigate variations from expectations by seeking
relevant explanations from management and appropriate corroborating evidence.
Examples of analytical procedures: perform a fluctuation analysis: consider the usefulness of obtaining a schedule categorized by
subsidiary, product line, division, and/ or reported weekly, monthly, quarterly; dividing the account balance into component parts
and scrutinizing the individual parts for unusual items; analyzing trends in the company’s accounts payable balance before and
after the balance sheet date; compare the inventory balances to total liabilities and cost of goods sold; computing financial ratios
and comparing results with industry averages and competitors and with previous periods (ratios applicable to accounts payable
include: accounts payable turnover ratio = cost of sales / accounts payable).
4. Verify accounts payable balances (A, E)
For selected vendor accounts payable trace the items from the list obtained above against supporting documents (invoices,
receiving reports, purchase orders, supplier’s statements).
For vendor invoices subsequently paid trace recorded liabilities on the detailed listing to the payment records and verify that the
payments relate to the detail account balance by agreeing invoice amounts and numbers.
5. Test for unrecorded liabilities (C)
Select all invoices over a certain amount (determined in relation with the engagement materiality) and a sample of other invoice
amounts from all accounts payable sources (files in which invoices received are kept, payment records – bank statements, records
for goods received but not yet invoiced, credits for returns) for the period after the balance sheet date and up to the date of the
completion of fieldwork. By reference to supporting documentation, determine whether the item has been properly included as a
liability of properly excluded.
6. Confirm selected accounts payable balances (C, A, E, RO)
Send request of confirmation of accounts payable balances to counterparty, obtain confirmation letter from counterparty and trace
the amount as per confirmation against amount as per accounts payable breakdown. Investigate differences if any. Summarize
confirmation coverage. For confirmation not returned, obtain supplier’s statement and the detailed listing and reconcile with the
accounts payable breakdown, investigate all reconciling items by inquiring with management and investigating supporting
documentation (vendor invoices, receiving reports, cash payments). Determine any adjustments are necessary.
7. Subsequent payments (RO)
Check that accounts payable balances outstanding at the audit date have been paid subsequently by tracing them against bank
statements.
8. Valuation of liabilities expressed in foreign currencies (V)
Obtain a list with all payable accounts balances per currency and amount. Valued the payable accounts balances denominated in
different currencies using exchange rates at the audit date and trace the total against accounts payable balance as per trial
balance.

______________________________
A = accuracy / C= completeness / E = existence / V= valuation/ CO = cut off / PD = presentation & disclosure / RO = rights & obligations
 L – FURNIZORI / Suppliers

Revised by/
Performed
Done/ No/

paper ref.
Not appl.
Working

by/ date
Task description

9. Test cut off at time of inventory and year-end (CO)

Review the cut-off at the time of inventory taking and at year-end, if different and coordinate testing with inventory cut-
off procedures.
Where limited or no comfort has been obtained from controls perform the following steps to obtain the desired level of
assurance: (a) update understanding of the clients’ cut off procedure; (b) review the last numbers of prenumbered
documents to ensure that documents have been used in sequence and earlier numbers are included in, and later
numbers are excluded from, transactions in the period; (c) for selected purchases and services for the periods before
and after the cut-off date, examine the related records of goods received or invoices to determine that invoices are
recorded in the proper period; (d) for selected debit memos (goods sent back to suppliers) for periods before and
after the cut-off date, examine the related records of returns to determine that they are recorded in the proper period;
(e) review fluctuations in purchases near the year-end.

______________________________
A = accuracy / C= completeness / E = existence / V= valuation/ CO = cut off / PD = presentation & disclosure / RO = rights & obligations