Accounts Payable Audit Simplified: Guide to Effective AP Auditing

They often appear as credits in the accounts payable ledger, which a company can use to offset future payments to vendors. The final step in an AP audit is to ensure that all transactions and activities are properly disclosed. This means your payable balance must be recorded in your year-end financial statements. The https://www.bookstime.com/ auditor will spend several days or weeks sifting through financial reporting.

• When evaluating compliance, auditors must discover proof that GAAP for AP transactions is being followed.
• Once everything has been reviewed, an audit report is developed and shared among the stakeholders.
• Here’s a checklist of factors to remember to help you stay focused as you work through your unique software selection process.
• Auditors may also request financial documents like your general ledger and balance sheets.
• This is a short-term liquidity calculation that’s used to quantify the rate at which a business pays off its suppliers.
• They also appreciate its dual focus on AP and AR, though some reviewers noted issues with the receivables side of BILL’s solution.
• Symbeo automates complex AP workflows, supporting high-volume data and multi-department approvals.

Why AP Automation?

Obviously, the accuracy of a company’s financial records is critical, and an AP audit will look to confirm the accuracy of the AP practices. Auditors will perform several procedures at this stage, including examining the SOP, and recalculation of supplier invoices and payments. Either the internal team fails to provide the specific invoices, purchase requests, and purchase orders, or it gets lost in the pile of documents. This slowdown in the audit process increases the risk of oversight and incomplete scrutiny, compromising accuracy and thoroughness.

Gather documents with this checklist.

If you identify internal control weaknesses, you must create audit procedures to address them. For example, say you find out one person prints checks, signs them, records payments, and reconciles the bank statement (i.e., there’s a lack of segregation of duties). An accounts payable audit is an examination of your company’s accounts payable records. It verifies the accuracy, validity, and completeness of the payments made and liabilities owed to your suppliers. A business should audit payables at least once a year, at the end of the financial year, to ensure no discrepancies or errors in the accounts payable reports.

AP & INVOICE PROCESSING

The number and type of vendors that receive these requests can vary depending on the type of business you run. Most auditors will contact regular suppliers and vendors, regardless of whether there is an outstanding balance or not. If your AP automation software supports integration with other accounting software, it’s easy to access data contained in those systems as well. From discovering potential fraud to uncovering inefficiencies in your operations, an AP audit is a valuable tool for achieving greater success. Ramp offers a free plan for core services like controlling spending, automating payments, and closing your books. Ramp Plus is a step up that gives you access to more granular controls and additional customization options for $15 per user per month.

• The primary method for testing the completeness of accounts payable is to search for unrecorded liabilities.
• Performing an accounts payable audit is crucial to ensure financial accuracy, prevent fraud and maintain regulatory compliance.
• By eliminating paper and adopting AP automation, you also avoid misplaced, lost, and disorganised transactional information.
• Generally accepted accounting principles will vary by region, so the first step in planning for an audit is to schedule a meeting ASAP to discuss what you need.
• As finance tech professionals ourselves, we know how critical and difficult it is to make the right decision when selecting software.
• As a result, audits become more streamlined, faster, and less stressful, ensuring strict adherence to rules and optimal functionality.

An accounts payable audit helps catch these errors early, minimizing the chances of financial misstatements or fraudulent activity. This ensures that payments are made to the right vendors at the right time, safeguarding the company’s reputation. AP audits detect invoice processing, payment, and data entry errors that, if left unchecked, could lead to financial losses or operational inefficiency. By finding and correcting unrecorded liabilities, audits ensure accurate financial records and improve AP processing efficiency. There is no strict schedule for how often a business should conduct the AP auditing process, but typically a company will go through a process of AP auditing to review year-end financial reporting.

Best practices for effective AP audits

• AP automation offers one of the quickest, most effective ways to deal with fraud as there’s less room for human error.
• We have provided an Accounts Payable checklist so that you can be sure you’re conducting a thorough audit.
• For example, the Sarbanes-Oxley Act requires all public businesses to submit records yearly to a third party for an external audit.
• With the integration of real-time systems, auditors can access live data during the audit process.
• The time saving from AP automation can also translate into cost savings since the automated process takes less time than a paper-based AP process.

Implementing an automated electronic invoicing (e-invoicing) solution is the best way to tackle fraud. Automated procedures create an instant audit trail of your AP documents that make it easier to search for common indicators of fraud. Finally, during the next accounts payable audit, it’s important to compare the results from the prior audit to changes made in the AP department. Hopefully, your company will have made proper adjustments and will come out a leg ahead in the new year’s audit. An AP audit and report aren’t the end of the audit process but just the initial stage.

Are AP Audits Mandatory?

When evaluating compliance, auditors must discover proof that GAAP for AP transactions is being followed. An accounts payable audit is a research activity that certifies the accuracy of financial statements. It ensures your accounts payable transaction reports are accounts payable audit accurate representations of the financial activity in the company. Automation matches invoices correctly, helps avoid duplicate payments, and creates a record of all transactions so your AP and finance teams are always audit-ready. Stampli complies with SOC 2 Type 2 requirements for data security, availability, processing integrity, confidentiality, and privacy. It helps maintain a complete audit trail by storing all invoices, transaction data, and records of actions, approvals, and decisions and ensuring they are accessible and auditable.

When performing the completeness test, auditors will also randomly select vendor statements to see if they match with the vendor account. AvidXchange offers AP automation software that lets AP teams create customizable routing rules, tracking every action and invoice with a detailed audit trail for full historical accounting visibility. To prepare for an accounts payable audit, AP teams should consider completing the items on this accounts payable audit checklist. Though there’s not a consistent set of standard operating procedures (SOPS) for AP audits, every company typically experiences an accounts payable audit in a series of phases. With industry-leading security systems, granular spend controls, automated approval workflows, and AI-powered reconciliation, Airbase gives you all the tools you need to stay audit-ready.

Helping organizations spend smarter and more efficiently by automating purchasing and invoice processing. AP automation is the best way to give your accounting team the ability to stay ahead of the competition and work in a less stressful environment. The auditor then contribution margin has the responsibility of ensuring that all company records adhere to the Generally Accepted Accounting Principles, otherwise known as GAAP.