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Assignment Ind

Mind

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Zelalem Teshome
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6 views

Assignment Ind

Mind

Uploaded by

Zelalem Teshome
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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1.

Internal Control Over Accounts Payable

Internal control over accounts payable is a system of policies and


procedures designed to ensure that an organization’s obligations are
accurately recorded and paid in a timely and authorized manner. Effective
internal controls help prevent errors, fraud, and financial misstatements
while ensuring compliance with laws and regulations. Key components
include:

1. Segregation of Duties: Separate responsibilities for approving invoices,


recording transactions, and making payments to reduce the risk of fraud
or errors.

2. Authorization Procedures: Implement clear approval processes for


purchase orders, invoices, and payment requests. Only authorized
personnel should approve payments.

3. Reconciliation: Regularly reconcile accounts payable records with


vendor statements and general ledger accounts to identify discrepancies
and resolve them promptly.

4. Document Management: Maintain proper documentation, including


purchase orders, invoices, and receipts, to support all transactions and
payments.

5. Vendor Verification: Validate new vendors and review changes to


vendor information to avoid fraudulent or duplicate payments.

6. Timely Recording and Reporting: Ensure that all accounts payable


transactions are recorded promptly and accurately to provide reliable
financial reporting.

7. Monitoring and Auditing: Conduct periodic internal audits and monitor


compliance with accounts payable policies to detect and correct
irregularities.

These controls contribute to financial integrity, operational efficiency, and


risk management within an organization.

2. Audit Program for Accounts Payable and Other Liabilities

An audit program for accounts payable and other liabilities is a structured


plan outlining the procedures auditors will use to evaluate the accuracy,
completeness, and validity of an organization's liabilities. The program
ensures compliance with accounting standards and identifies potential
risks such as misstatements or fraud. Key steps in the audit program
include:

1. Understanding Internal Controls:


Assess the design and implementation of internal controls over accounts
payable and liabilities. This includes reviewing segregation of duties,
authorization processes, and reconciliation practices.

2. Risk Assessment:

Identify areas of potential risk, such as unrecorded liabilities, duplicate


payments, or fraudulent transactions. Use this information to focus audit
efforts.

3. Analytical Procedures:

Perform trend analysis and ratio comparisons to identify unusual changes


in accounts payable balances, payment patterns, or liability levels.

4. Testing Transactions:

Vouching: Select a sample of accounts payable entries and trace them to


supporting documents (invoices, purchase orders, and receiving reports)
to verify authenticity and accuracy.

Cut off Testing: Ensure liabilities are recorded in the correct accounting
period by reviewing transactions near the balance sheet date.

5. Confirmation:

Confirm balances with vendors and creditors to verify the existence and
accuracy of recorded liabilities. Address any discrepancies identified
during the confirmation process.

6. Reconciliation Review:

Review reconciliations between the accounts payable ledger, general


ledger, and vendor statements to ensure completeness and accuracy.

7. Search for Unrecorded Liabilities:

Examine subsequent payments, review expense accounts, and inspect


unmatched invoices to detect liabilities that may not have been recorded.

8. Compliance Checks:

Evaluate adherence to company policies, contracts, and legal obligations


related to liabilities.

9. Documentation and Reporting:


Document audit findings, including any errors, omissions, or control
weaknesses. Provide recommendations for improvements where
necessary.

By following this program, auditors can ensure accounts payable and


liabilities are accurately reported and adequately controlled.

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