Subject: Suggestions for Alternative Procedures
Hello Audit Team,
I’d like to hear your thoughts on the best alternative procedures to follow when we don’t receive accounts payable confirmations from third parties. What approaches have you found to be effective in this situation?
Thank you!
One response
Dear [Name],
When encountering a situation where accounts payable confirmations are not received from third parties, several alternative procedures can be employed to obtain sufficient Audit evidence. Here are some suggestions:
Subsequent Cash Payments Testing: Review subsequent cash disbursements to see if any payments were made to the vendor in question. This can help verify whether the liabilities exist as recorded on the books.
Vendor Statements Review: Obtain vendor statements directly from the accounts payable system or request them from the vendors. Compare the balances on these statements with the amounts recorded in the company’s accounts.
Cut-off Testing: Perform cut-off tests at year-end to ensure that accounts were recorded in the correct period. This might include examining purchase orders, receiving reports, and invoices.
Analytical Procedures: Analyze the accounts payable balances by comparing them to prior periods or budgeted amounts. Unusual fluctuations may indicate potential misstatements.
Inquiry with Management: Conduct inquiries with management regarding significant vendors and any disputes or issues that might have impacted confirmations.
Look for Invoices: Review supporting documentation such as invoices, purchase orders, and receiving reports to substantiate the recorded liabilities.
Alternative Confirmations: Consider sending alternative communications to the vendors, such as requests for outstanding invoices or payment schedules that may help in verifying the liabilities.
It’s essential to document any alternative procedures performed and assess their effectiveness in meeting Audit objectives. If none of these procedures provide sufficient evidence, further discussions with stakeholders may be warranted to understand the implications.
Best regards,
[Your Name]