The accounts payable section of any business has the important task of handling money owed to the company’s creditors. An audit can reveal things like duplicate payments, unrecorded liabilities, fraud, and other problems that have the potential to greatly damage a business’ finance. However, many companies struggle to come up with the right auditing procedures which can lead to major oversights. If you are conducting an audit, it is important to avoid making these major mistakes.
Not Planning the Audit in Advance
Many people think an audit is as simple as showing up in accounts payable and jumping straight into reviewing finances. However, going in without a plan often leads to people forgetting important parts of an audit. You need to start by crafting an outline that details how you plan to handle all the fieldwork and documentation of the audit. Make sure to create a list of all documentation you will need, what questions you want answered by the audit, and what software or other solutions you want to use to carry out the actual audit.
Only Communicating Auditing Needs to a Few Employees
Auditors are there to catch any potential oversights in an accounts payable department, so they may run into problems if they are just relying on one person to help them access all the information they need. It can feel a little tedious, but people performing the audits need to take the time to talk to all employees in accounts payable. This can ensure they get all the documentation they need to fully understand how the accounts payable area works in any specific business. Just talking to a manager during an audit means that an auditor can miss out on important details.
Using Outdated Auditing Practices
One of the major issues during an accounts payable audit can actually be out of date techniques. Auditors that take the time to regularly educate themselves on industry compliance standards and best auditing practices can provide a more thorough audit of a company. Those who are willing to learn how to use new software can often end up with quicker and more informative audits.
Not Paying Attention to Which Employees Perform Which Tasks
Since accounts payable is fairly susceptible to fraud, one needs to think about the people behind the numbers and forms. A good accounts payable department should have plenty of separation between tasks, but this is not always an option in smaller businesses. You need to keep an eye out for this issue because it will affect how you perform your audit. For example, if one person is responsible for signing checks and recording payments, it may be important to take a closer look at their procedures. Noticing the names behind the tasks can ensure that all auditing procedures are being properly followed.
Neglecting Reporting Duties
It is easy to get caught up in all the minutiae of examining accounts, invoices, and software during an audit, but auditors need to remember that just looking at all the accounts payable details is not their only job. Even the best audit is worthless if it is not thoroughly reported. Make sure to keep rigorous notes during the audit, and plan on spending quite a while drafting a thorough report at the end. Using standard auditing report formats is helpful, but remember that it may be hard for managers and shareholders to follow this report. It can be helpful to draft a quick overview that explains all major problems and recommendations in interesting and easy-to-understand language. Just remember to back all general statements with detailed facts in the main report.
Focusing on Details Instead of the Big Picture
Of course, any audit needs to be a detailed and rigorous look at the numbers, but this can get in the way of an effective audit for accounts payable sometimes. Auditors who do nothing but check-off lists and fill out forms without thinking critically about the numbers are missing out on the whole point of the audit. It is important to remember that analysis is one of the key goals of any audit. Ask yourself questions like “is the high number of mistakes on this form due to the autofill function in the invoice software” or “could these missing purchase orders be happening because an unauthorized person is submitting purchases?” Think about cause and effect and consider potential causes for the mistakes you are noticing. This can help to make an audit a truly valuable function instead of simply being a list of numbers and documents.
As long as you remember to keep an eye out for these mistakes, you can make sure your accounts payable audit goes as smoothly as possible. Taking the time to regularly perform these audits can ensure that your accounts payable department is living up to expectations and operating efficiently.