AP AUDIT DOCUMENT

Client: Future Milk Co., Ltd

Period: 12/31/2018
Prepared by:
ACCOUNTS PAYABLE AUDIT PROGRAM

AUDIT PROCEDURES

● All audit work should be recorded in the relevant working papers (attached as necessary), and
recorded on this document in the columns indicated.
● If modification to existing auditing procedures is necessary to complete audit objectives, document
all changes and include working papers as necessary.

AUDIT OBJECTIVES FINANCIAL ASSERTIONS

Obtain complete documentation of actual

● Existence/Occurrence
obligations held by COMPANY NAME,
including current liabilities and unprocessed ● Rights and Obligations
invoices for products and services received but not
● Completeness of Information
billed as of period end.

Confirm entry amounts provided by accounts

payable match paired invoices, purchase orders, ● Existence/Occurrence
and other supporting documentation. All
transactions are correctly recorded with regard to ● Rights and Obligations
account, amount, and period. ● Allocation and Valuation
Ensure accounts payable are correctly classified as
current liabilities.
Verify that debit balances above established
threshold are moved and processed as other assets. ● Presentation

Establish sufficient disclosures for payables with ● Disclosure

specific payment terms, assets used as collateral
via accounts payable, and related-party
transactions in accounts payable.

Identify internal controls in need of improved risk

management and suggest modifications as ● Compliance
necessary.

COMPLETED WORK PAPER

PROCEDURE
BY REFERENCE

1. Obtain (or prepare) a balance sheet from accounts payable

for the indicated date.

a. Verify the accuracy of the amounts in the listing and

reconcile it with the general ledger.

b. Review the balance sheet to identify large debit balances.

Confirm these balances with vendors and reclassify to other
assets as relevant.

c. Identify and transfer from trade accounts to accounts

payable in prepared financial statements any related-party
transactions as determined by their amounts.
d. Isolate and discuss past due, if any, have been promised to
ensure payment of these outstanding balances.

2. Determine whether confirmation of the accounts payable

balance sheet, as of the date listed, is required. If so:

a. Create a list of the major suppliers from whom

confirmation is required and to whom requests should be
sent. Discuss any objections made to contact the companies
on this vendor list and, if necessary, perform alternative
confirmation procedures as required.

b. Create and send the confirmation requests to the

companies on the vendor list.

c. Collect confirmation replies and use the information

provided to create a summary worksheet that includes:
 Date of receipt
 Vendor name
 Outstanding balance to vendor per balance sheet
 Outstanding balance per vendor confirmation
 Difference (if any)
 Analysis and explanation

d. If a vendor confirmation is not returned, use alternative

confirmation methods, such as:
 Reviewing unpaid vendor invoices and paired
purchase orders and receiving documentation
 Confirming payment of the outstanding liability was
made after the date listed on the sheet.
3.Search for unrecorded liabilities falling between the
balance-sheet date and the execution of the AP audit:

a. Search the cash disbursements journal for all payments

exceeding a pre-defined amount and review accompanying
documentation (e.g., purchase order, vendor invoice).
 For products or services received before the date on
the balance sheet, ensure the liability is recorded
correctly by that date.
 For those received after the date on the balance sheet,
confirm that the amount listed has been excluded
from accounts payable by the date on the sheet.

b. Collect all unprocessed invoices and vendor statements as

of the audit date. For amounts exceeding a predetermined
value, confirm the amount on each invoice is correctly
included or excluded from accounts payable as of the date on
the balance sheet.

c. Collect all receiving reports that have not been cross-

matched with vendor invoices. Confirm if the goods and
services listed were received as of the date on the balance
sheet.
 For received goods and services, confirm the liability
has been recorded.
 If an invoice has not been received from a vendor,
consult the related purchase order, prior invoices for
the same goods and services, or contact the vendor
directly.

d. Consult the accounts payable accountant regarding their

knowledge of any unrecorded liabilities.
e. Compare the trade accounts payable listing from the end of
the current period to the one from the period before. If any
monetarily significant items were included in the previous
period but don’t appear in the current listing, determine
whether they have been overlooked and should in fact be
recorded in accounts payable by the date on the balance
sheet.

4. Identify and confirm any amounts in trade accounts

payable with specified payment terms. Reclassify these
liabilities to notes payable as appropriate and, if they do not
bear interest, discuss with your team whether these items
should be listed at their current (likely lower) values for the
purposes of financial reporting.

5. Consult the accounts payable accountant regarding any

assets currently utilized as collateral on accounts payable and
ensure they are adequately disclosed on financial statements.

6. Ensure vendor credit memos received after the date on the

balance sheet are recorded for the correct period.

7. Analyze the records provided by accounts payable and

thoroughly investigate any significant deviations from
expected values.

a. Compare current balances with the previous year’s for:

 Gross payables
 Discounts
b. Calculate these ratios and compare them to the previous
year’s values:
 Accounts payable turnover rate
 Accounts payable days outstanding
 Value of current accounts payable as compared to
current liabilities
 Purchases as compared to purchase returns and
allowances

8. If fraudulent behavior is a concern, consider performing

the following additional audit procedures:

a. Contact all the suppliers on the vendor list and request full
information regarding any outstanding invoices as well as
payment history, terms, etc.
Be sure to include old and new vendors, as well as supplier
accounts with small or no outstanding balances.

b. Confirm supplier contact information as pertains to

invoices invoices using this master vendor list.

c. Track down any strange or unusually large year-end

transactions or adjustments that didn’t (for example) go
through normal approval processes or are lacking in support
documentation.
 d. Carefully examine all vendor files for non-standard or
modified documentation, including:
 Hand-written forms (especially in an automated
environment)
 Multiple, incomplete, or inaccurate addresses for a
single vendor.
 Disbursements issued for transactions without any
associated goods.
 Suspicious or thin documentation for payments made
in amounts just under those requiring approval.

Based on the procedures performed and the results obtained, it is my opinion that the objectives
listed in this audit program have been achieved.
Performed by Date
Reviewed and approved by Date
Conclusions:
Comments: