Timing Issues in Accounts Payable Audits As you know, companies cannot possibly

Question

Timing Issues in Accounts Payable Audits

As you know, companies cannot possibly pay their debts by the last day of the fiscal year. You will discuss how auditors treat the timing issues encountered in accounts payable audits.

As part of the audit process, auditors like to try to get as much work as possible done before the balance sheet date. This is possible with several accounts due to their nature and the extent of the testing done. However, the accounts payable audit is performed after the balance sheet date.

What are some of the reasons that accounts payable testing should not be performed until after the company year end?

What are the specific timing issues that come into play when the auditor tries to determine the true value of accounts payable?

Why are audit confirmations so critical in valuing accounts payable?

Explanation / Answer

Reasons that accounts payable testing should not be performed until after the company year end is that Accounts Payable are usually not confirmed because there is better evidence available to the auditor only at year end. If the auditor reviews all the cash payments for a sufficient time after the balance sheet date for items pertaining to the period under audit and finds no such payments were recorded as liabilties at year end, the auditor is reasonably assured that accounts payable are not understated.

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