Your Complete Accounts Payable Audit Checklist

Your Complete Accounts Payable Audit Checklist

Accounts payable audits are essential for ensuring the accuracy, completeness, and integrity of a company’s financial records. By meticulously reviewing payable transactions, invoices, and vendor relationships, organizations can identify errors, mitigate risks, and enhance efficiency in their financial processes. Here, we provide a detailed checklist covering key areas to examine for your accounts payable audit. 

Vendor Master File

Verify the accuracy and completeness of vendor information, including names, addresses, tax identification numbers, and payment terms. Review the process for adding, modifying, and deactivating vendor accounts to prevent unauthorized changes and potential fraud.

Invoice Processing

Confirm that invoices are properly authorized, approved, and supported by appropriate documentation, such as purchase orders, contracts, or receiving reports. Ensure that invoices are accurately recorded in the accounting system, including proper expense coding and allocation to the correct cost centers or projects.

Payment Processing

Validate the segregation of duties between individuals responsible for initiating payments, approving payments, and reconciling bank statements to prevent conflicts of interest and unauthorized transactions. Review the controls and procedures for electronic payments, wire transfers, and ACH transactions to safeguard against fraudulent activities and unauthorized fund transfers.

Accruals and Prepaid Expenses

Scrutinize accruals for expenses incurred but not yet recorded in the accounting system, ensuring that they are accurately estimated and properly classified on the balance sheet.

Verify the accuracy of prepaid expenses, such as prepaid rent or insurance premiums, by reconciling prepaid balances to supporting documentation and adjusting entries.

Duplicate Payments and Overpayments

Perform a thorough analysis of payment records to identify any instances of duplicate payments, erroneous billings, or overpayments to vendors. Implement controls and reconciliation procedures to prevent duplicate payments and promptly recover any overpaid amounts through vendor credits or refunds.

Vendor Contracts and Agreements

Review vendor contracts, service agreements, and purchase orders to validate pricing terms, delivery schedules, and payment terms against actual invoicing and payment records.

Assess compliance with contractual obligations, including volume discounts, early payment discounts, and rebate programs, to maximize cost savings and vendor relationships.

Internal Controls and Segregation of Duties

Evaluate the effectiveness of internal controls over accounts payable processes, including segregation of duties, authorization limits, and dual controls for sensitive transactions.

Identify any vulnerabilities or deficiencies in control procedures and recommend enhancements to strengthen the control environment and mitigate risks of fraud or errors.

Reporting and Reconciliation

Generate accounts payable aging reports and reconciliation schedules to reconcile outstanding balances with vendor statements, general ledger accounts, and subsidiary ledgers. Investigate and resolve any discrepancies or variances identified during the reconciliation process, ensuring the accuracy and integrity of financial reporting.

Contact Scharf Pera & Co., PLLC, for Audit Support

Conducting a thorough accounts payable audit using the above checklist can help organizations detect and prevent errors, fraud, and compliance issues, ultimately improving financial transparency, efficiency, and accountability. Need support with your auditing processes? Contact Scharf Pera & Co., PLLC, today to schedule a consultation.


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