Department of Internal Audit and Compliance

Finance and Accounting - Accounts Payable

Effectiveness and efficiency of operations 

A. Accounts payable records and cash disbursements are safeguarded.

1. Have the following functions and duties been segregated: accounts payable, purchasing, receiving, vendor maintenance, goods receipt, payables invoice processing, disbursement preparation, disbursement approval, disbursement processing, recording of cash disbursements, bank reconciliations, approval of bank reconciliations, other accounts payable accounting/maintenance, and general ledger functions?

B. Costs are reduced as much as possible.

1. Are transactions that are significant in dollar amount or unusual in nature edited exclusively (for example, check arithmetic extensions, approvals, signatures, and authorizations)?

C. Processing time is minimized.

1. Is efficiency in processing monitored through relevant performance measures, such as error rates, invoices processed per AP technician, time to pay an invoice, or number of invoices processed per day?

Reliability of financial reporting 

A. Accounts payable and cash disbursements are properly authorized.

1. Do accounts payable personnel reconcile batch totals of the invoices entered for the day with a post-input report of invoices entered into the accounts payable system?
2. Are the vendors, quantities, price, extensions, footings payment terms (including available discounts), supplier name and code, purchase order reference, and accuracy of the account distribution agreed between the invoice receiving report and the purchase order?
3. Have computer system routines been implemented that automatically match the invoice transactions entered to computerized records of purchase orders and receiving reports?
4. Do computer system routines approve invoices for payment when an exact match between invoice data, purchase order data, and receiving report data exists?
5. Are requests for manual checks supported with purchase agreements, receiving reports, original invoices, or other documentation that indicates the propriety of the expenditures?
6. Have computer system routines been implemented to identify receiving records that have not been matched to invoices for an excessive amount of time in ensuring that all liabilities are properly accounted for?
7. Are quantities, prices, extensions and footings of invoices, accuracy of account distribution, and proper approvals checked prior to general ledger journal entry?
8. Are control totals determined prior to inputting invoices? Do computer routines reconcile this amount to the total of invoices accepted or rejected during systems processing?

B. Recorded accounts payable balances are substantiated.

1. Is the maintenance of the accounts payable subsidiary records segregated from employees who check and approve accounts payable documents or maintain the accounts payable control account?

C. Recorded accounts payable balances are evaluated.

1. Are vendor surveys, complaints, and questions utilized to gather relevant information about the accounts payable process and to facilitate performance measurement?
   
   

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