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ACCOUNTS PAYABLE/EXPENSE
DOCUMENTATION
IfAccountsPayable/Expenseisdeemedtobeasignificanttransactioncycle,thenperformthefollowing.Pleasedocumentthefollowing:1.Whosignsandissuespurchaseorders(ifapplicable)?
2. Ifthereisareceivingfunction(wherematerialsarereceived),thennotepersonswhocountmaterialsreceivedandwhetherthosecountsarerecordedinthecomputersystem.
3.Whoauthorizespaymentofinvoicesandhow(e.g.initialsoninvoice)?4.Whoisauthorizedtosignchecks?5.Howmanysignaturesarerequiredonchecks?
6. Ifsignaturestampsexist,whoisresponsibleforcustodyofthestamp?Howoftenisthestampused?
7.Whattypeofcheckstockdotheyuse(preprintedorcomputergenerated)?
Ifthechecksarepre-numbered,isthesequenceaccountedforregularly,
andunissuedchecksarecontrolledandkeptinasecurelocation?Howarevoidedcheckstrackedandaccountedfor?
8.Whokeystheinvoicesintothecomputersystem?
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9.Whocanaddvendorstotheaccountspayablesystem?10. Whoisauthorizedtoaddvendorstothesystem?
11. WhoreconcilestheA/PdetailtotheG/L?Isthereconciliationperformedatleastmonthly?
12. DotheymatchtheP.O.,theinvoiceanddeliveryticket(ifapplicable)forquantityandprice?
13. Whoopensthebankstatements?
14. Whoreconcilesthebankstatement?
1. thesegregationofduties.Arethefollowingsegregated?a.Custodyofassets(e.g.signedchecks)b.Reconciliationprocedures(e.g.personwhoreconcilesbankaccount,personwhoreconcilesA/PtoG/L)
c.Authorization(e.g.signerofchecks)d.Accounting(e.g.personwhokeysininvoicesandaddsvendorstosystem)
NoteIfsignaturestampexistsandisavailabletopersonother
thantheauthorizedsigner,thentreatpersonwhohasaccesstothestampasonewhocanauthorizepayment.
CustodyofAssets Reconciliation Authorization Accounting
Iftheyarenotsegregated,arethereanymitigatingcontrols(e.g.monitoringperformedbyboardorowners)?
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2. thefollowingforonetransaction:a. IssuanceofaP.O.b.Authorizationforpayment(e.g.initialsoninvoiceandappropriatesignaturesonchecks)
c. PostingofinvoicetoG/Lwithappropriateaccountnumberd.MatchofinvoicequantityandpricetothePOe.Reconciliationofbankstatementforthatmonth
P.O.#Examined:Check#Examined:G/LAcct.#Examined:
Quantity PricePerPurchaseOrder PerInvoice Bankreconciliationexaminedforthemonthof:Nameofpersonwhoperformedthebankreconciliation:
3. about:a.Whoperformstheabovewhenpersonsareoutsickoronvacation?
b.Hasthesystemchangedduringtheyear?
c. Havepersonnelbeenaskedtooverridecontrols?
d.Areaccountspayablefunctionsbeingperformedonatimelybasis?
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Doesitappearthatthereareanycontroldeficiencies(seedefinitionsbelow)?
___Yes____NoIfyes,thennotecontrolweaknessesontheControlDeficiencyCommentandManagementPointDevelopmentform(forpotentialinclusionintheinternalcontrolcommunicationtotheclient).
Control Deficiency. A control deficiencyexists when the design or operation of a control doesnot allow management or employees, in the normal course of performing their assigned functions,to prevent, or detect and correct misstatements on a timely basis. The communication of controldeficiencies that are not considered significant deficiencies or material weaknesses can be either
written or oral.
Significant Deficiency. A significant deficiency is a deficiency, or a combination of deficiencies,in internal control that is less severe than a material weakness, yet important enough to meritattention by those charged with governance.
Material Weakness. A material weakness is a deficiency, or combination of deficiencies, ininternal control, such that there is a reasonable possibility that a material misstatement of theentitys financial statements will not be prevented, or detected and corrected on a timely basis.[As used in the SAS, a reasonable possibility exists when the likelihood of the event is eitherreasonably possibleorprobableas those terms are used in Statement of Financial AccountingStandards No. 5, Accounting for Contingencies(FASB ASC 450).]
Iftherearesignificantdeficienciesincontrols,thenconsidertheweakness
indevelopingyourauditprogramforthisarea.
DisclaimerThisdocumenthasnotbeenpeerreviewed;userassumesall
risksrelatedtoitsuse.
Created by Charles B.
Hall, CPA, CFE, MAcc
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