Specific control operated by clients over the completeness of trade payables
Reconciliation of month-end balances to supplier statements. If the client has carried out this reconciliation at year end for all suppliers then the auditor can review these. If not, it becomes a substantive procedure for the auditor to undertake
Primary objective of auditors work in testing payables
Ascertaining whether liabilities existing at year end have been completely and accurately recorded (not understated)
the two detailed objectives in testing payables
- is there cut off between goods received and invoices received so payables are recognised in the current year
- do payables represent the legitimate amounts due by the company
You can use payables confirmations but why isnt this used widely in practice?
reliable independent evidence can also come in the form of suppliers’ invoices and statements
What type of confirmation do auditors use?
Positive/Blank/Zero space. It does not state the balance owed but requires the supplier to declare the amount owed at year end and to provide a detailed statement of account. When it is received, any variances are investigated and reconciled
