Preparing for Accounts Payable Audits
Whether we are talking about a large publicly traded company preparing for a SOX audit or an SMB with a small board of investors, financial audits are a part of doing business. And Accounts Payable audits are an important part of protecting a company and its stakeholders against costly errors and spending fraud.
Accounts Payable audits can be a headache, lasting anywhere from a week to a month. To help ease that strain and time crunch, a business can streamline audits by keeping a few AP Audit items in mind during their daily processes.
Generally Accepted Accounting Principles (GAPP)
CFOs, Controllers and other accounting leaders can expect accounts payable auditors to investigate whether or not a business is complying with GAPP, a set of guidelines created by the Financial Accounting Standards Board. Public companies in the United States must follow GAAP guidelines in their financial reporting, and many non-public companies use them as matter of keeping best practices.
Errors & Fraud
Checking for errors like duplicate payment issues and issues with incorrect or invalid invoices being paid is very likely going to be part of any AP audit. Auditors are also going to be looking for fraudulent activities like credit card or wire fraud.
Auditors will also likely check for unrecorded liabilities. Auditors look at a sampling of post year-end checks and verify they were not issued in payment of liabilities that were created pre year-end. If they discover one of these discrepancies they will check for a payable entry at year-end, and an adjustment may have to be posted.
Approvals & Payments
An AP Audit will look to see if accounting records of approvals and payments are being properly created and entered. Giving auditors viewing access to approvals and original invoices so they can quickly run the reports they need can reduce a huge amount of strain in the audit process.
They will also likely want to check for any issues with vendors actually receiving payment. Using a direct ACH transmission utility within an accounting software suite as part of regular payment processing will greatly reduce the risk of being flagged on these issues during an audit.
Accounts Payable audits can be a stressful and time-consuming process, but a business will be much better prepared if they are equipped with agile, accurate and fast reporting abilities. With the right AP software solution, financial managers can gain 100% visibility and control over invoices, approvals and payments. And when audit time comes, the right AP software allows administrators to grant portal access to auditors to streamline their efforts and reduce strain on the company.