3
Audit Program Payables / Expenses
Company/Unit/Dept
: .
Period Covered
Area of Coverage
: Payables / Expenses
Done By
Audit Ref
: .
Reviewed By
Audit Objective: To deter- mine if purchases were made according to standard Company procedures
and to evaluate the appropriateness of expenditures.
Audit procedures / tests
1.
W/P Ref.
Auditors comments
W/P Ref.
Auditors comments
Can goods be purchased if not authorized?
Consider:
2.
a.
Purchase requisition and approvals?
b.
Purchasing segregated from receiving,
accounts payable, inventory records?
Can payables be set up if goods not received?
Consider:
a.
Receiving segregated from accounts payable
inventory records, purchasing?
b.
Receiving slip or other written record made?
c.
Adequate inspection,
shipments, etc?
d.
Invoices, receiving slips, direct to accounts
payable not purchasing?
e.
Invoices checked
receiving slips?
f.
Cancellation of documents and duplicates to
prevent re-use?
g.
Unmatched
regularly?
h.
Freight checked
purchases?
to
claims
purchase
documents
and
for
bills
Audit procedures / tests
Not to be reproduced without permission
short
orders,
investigated
matched
to
Page 1 of
3.
Can payments be made if not properly supported?
Consider:
a.
Discounts taken?
b.
Control when invoices paid before validating
complete?
c.
Check of extensions, additions, discounts?
d.
Two
signing officers independent of
purchasing, receiving, accounts payable, and
check preparation?
e.
First signing officer examines support for
payment and approves for completeness?
f.
Second signing officer scrutinizes support?
g.
Cheques mailed out directly?
h.
Independent bank
directly from bank?
i.
Reconciliations approved?
j.
Prenumbered cheques continuity accounted
for, control over unused?
k.
Bank transfers controlled?
l.
No bearer or "cash" checks?
reconciliation,
checks
4.
Can payments for non-routine purchases, (e.g. of
services be made if not authorized or properly
supported?
5.
Can liabilities be incurred but not recorded?
Check whether Suppliers' statements
reconciled?
6.
are
Can petty cash be misappropriated? Consider:
a.
Imprest funds, reasonable amounts?
b.
Approvals, vouchers cancelled?
c.
Periodic counts?
Audit procedures / tests
Not to be reproduced without permission
W/P Ref.
Auditors comments
Page 2 of
7.
8.
9.
Can fixed assets be acquired or disposed of
without proper authorization and recording?
Consider:
a.
Approved work orders for fixed assets and
major repairs?
b.
Approval of cost over-runs?
c.
Plant reporting of scrapping or disposals?
d.
Detailed fixed
inspection?
e.
Periodic insurance
coverage?
asset
ledger,
appraisals,
periodic
adequate
Select a sample of expenditures for current fiscal
year and follow the selected sample through each
point in the purchase cycle.
a.
Trace purchase to requisition, purchase order,
receiving report, and invoice.
b.
Verify that purchase has been properly
authorized.
c.
Verify that purchases or blanket orders are
within constraints set forth in Purchase Order
agreement.
d.
Determine the auxiliary's dependence on a
single or limited number of suppliers.
If the dept. is on an accrual basis, determine if an
account payable is recorded when merchandise is
received (if not, note when A/P is recorded).
10. Scrutinise the procedures for returned goods or
claims to suppliers and note any shortcomings.
11. Scrutinise the procedures on monitoring discounts
and note any shortcomings.
Audit procedures / tests
Not to be reproduced without permission
W/P Ref.
Auditors comments
Page 3 of
12. Examine holding file of unmatched or unfilled
requisitions for evidence of periodic updating.
Document and scrutinise the related procedures.
Note any shortcomings.
13. Scrutinise the external auditors management
letter and observe if there are still unresolved
issues (still open) at the date of internal audit
review.
14. Obtain the unpaid purchase order list as at the
date of internal audit review. Select 10 items over
60 days old.
Research to find why P.O.'s are still open.
15. Examine travel advances and expense reports for
3 days.
a.
Note proper approvals
b.
Note evidence of review by A/P
c.
Note
that
adequate
documentation is attached
d.
For expense reports, note that original
advance was properly reversed.
supporting
16. From vendor master list, select 5 vendors. Obtain
latest statement of account available.
Verify that written reconciliations to statements
were performed.
17. Obtain Organizational Chart and briefly review
responsibilities associated with each employee in
Accounts Payable.
18. Is there an up-to-date organizational chart
available, which reasonably fixes the responsibility
of key personnel?
19. Are there written procedures detailing
accounting routine and computer operations?
Audit procedures / tests
Not to be reproduced without permission
the
W/P Ref.
Auditors comments
Page 4 of
20. Are written procedures readily available to all
personnel?
21. Are procedures
followed?
and
other
directives
being
22. Do
the
procedures
address
verification
requirements for non-original invoices to reduce
likelihood of duplicate postings?
23. Is there a formal training program or structured
on-the-job training system for new employees?
24. Are accounts
approved?
payable
adjustments
properly
25. Are debit balances (if any) in A/P properly
reviewed and followed-up?
26. Is there a procedure whereby invoices are paid
within the discount period?
27. Are accounts payable liquidated in a reasonable
time?
28. Is there a proper procedure for processing credit
memos and promptly using them to offset
invoices?
29. Are authorized signatures limited to officers or
employees who have no access to accounting
records or to cash?
30. Are checks prepared by a person other than the
one who authorized the payment? Who?
31. Are bank accounts reconciled by a person who
does not sign checks, handle or record cash?
Audit procedures / tests
Not to be reproduced without permission
W/P Ref.
Auditors comments
Page 5 of
32. Is there a prohibition against checks made payable
to "Cash" or "Bearer?"
TRAVEL AND ENTERTAINMENT EXPENSE
33. Does the Company have established written
policies establishing certain standards, regulations
and allowances for travel and entertainment
expenses?
34. Do requests for travel advances
appropriate departmental approval?
require
35. Are guidelines established to control excessive
expenses advances?
36. Are expense reports prepared for each trip or
entertainment expenditure?
Are these reports required to be signed by the
person incurring the expense and is it required that
they be fully supported by detailed receipts, such
as transportation stubs and hotel bills, whenever
possible?
37. Are these expenditures reviewed and approved by
the department head, or someone other than the
party incurring the expense?
38. Is full explanation and support required for all
entertainment and all unusual expenses?
39. Is the submission of the expense report required
within a prescribed period of time after the
travellers return?
40. Does A/P review all expense reports to see that
expenses are reasonable and that they meet the
requirements and regulations?
41. Are there periodic reconciliations of the travel
advance account to ensure that advances are
removed when travel reports are processed?
Not to be reproduced without permission
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