Audit of AP

Question 1

How to search for unrecorded liabilities

Answer 1

1. Perform analytical procedures on accounts payable.
2. Examine documents supporting cash disbursements made after FYE. The auditor should examine the cash disbursements journal and supporting documents to determine whether there are any payments made in the subsequent accounting that represent liabilities at the FYE but had not been recorded.
3. Trace unpaid invoices subsequent to FYE to the purchase journal and supporting documents (e.g receiving reports to determine whether the invoices are obligations of the current financial year)
4. Examine vendors’ statements. Vendors’ statements which show a balance should be traced to the accounts payable listing to make sure it is included as a liability. Any differences between vendor’s statement and AP subledger should be accounted for via an AP reconciliation statement.
5. Trace receiving reports issued before FYE to related vendors’ invoices and accounts payable listing to determine whether they are included in the accounts payable.

Question 2

How to perform analytical procedures to search for unrecorded liabilities?

Answer 2

Perform analytical procedures to determine whether there are unusual or unreasonable relationships ( eg compare payable turnover ratio for prior & current year)

Question 3

How