Alternative Procedure Recommendations
Hello, Audit colleagues! In situations where we don’t receive accounts payable confirmations from third parties, what alternative procedures do you find most effective? Your insights would be greatly appreciated!
One response
Dear [Name],
Thank you for bringing up this important topic. In situations where accounts payable confirmations are not received from a third party, there are several alternative procedures that can be employed to obtain sufficient and appropriate Audit evidence:
Subsequent Payments Review: Examine subsequent disbursements to suppliers after the balance sheet date. This can help confirm whether the liabilities existed at year-end and can provide evidence about the completeness and accuracy of the accounts payable balances.
Vendor Statements: Request monthly statements from the vendors in question. These statements can provide detailed information regarding outstanding payables and can be reconciled against the client’s records.
Cut-off Testing: Perform cut-off tests around the period end by reviewing transactions just before and after the year-end. This can help to ascertain the validity of outstanding payables.
Alternative Confirmation Methods: If traditional confirmations are not possible, consider using alternative methods such as informal emails or phone calls directly to vendors to verify balances.
Analytical Procedures: Conduct analytical procedures to analyze trends and ratios related to accounts payable. This can help identify any discrepancies or unusual patterns that may warrant further investigation.
Internal Documentation Review: Review internal documentation such as purchase orders, receiving reports, and invoice approvals. This can help confirm the recording of liabilities even in the absence of external confirmations.
Management Representation: Seek a written representation from management regarding the completeness and accuracy of the accounts payable balances, while acknowledging the lack of confirmations.
By combining these alternative procedures, you can strengthen your Audit conclusions regarding accounts payable even in the absence of third-party confirmations. It’s always critical to document the rationale for the chosen procedures and the conclusions drawn from them.
Best regards,
[Your Name]