Internal Audit improves internal business processes of the company by reviewing risk management plans and business procedures to identify flaws among these. It is an independent management function for appraisal of functioning of an entity with a view to suggest Improvements, add value and strengthen the overall governance mechanism of the entity. It is based on analyses and assessments of data and business processes, providing insight & recommendations & values to governing bodies & senior management.
Internal Auditors are not responsible for execution of policy. They guide/advise Management/BOD regarding how to better execute their responsibilities.
- Develop Internal Audit Plan on the Basis of the Following:
- Previous years internal audit plan, Observations & key findings.
- Considering key business processes,
- Analysing requirements of internal Audits
- Based on assessments and findings during risk assessment procedure
- Requirement of the management, and identification of risk prone areas
- Accounts Payable – processing payments for invoices and Contracts – Internal Audit
In this article, we will discuss in detail, analyse and assesses the internal control procedures, financial process and action of the personnel who are involved with the Accounts Payable financial activities.
Accounts payable refers to amount that an organisation is required to pay to its creditors for goods and expenditure for services rendered. These are generally short term obligations but does not include amount payable to staff, that are paid through
Departments shall devise techniques and procedures for the proper approval and payment of expenditures for goods and services incurred to support its programs. Proper internal controls effectively and efficiently minimize the risks associated with accounts payable and purchasing activities, reduce the risks of fraud and costly errors, and protect the assets of the entity.
- Risk Associated With Internal Audit
- Unauthorised/fraudulent purchase/payments.
- Duplicate Payments to vendors
- Inefficient/Late processing of payments resulting in late fees and loss of goodwill
- No segregation of duties of the officers requisitioning, ordering, receiving goods and authorising payments.
- Payments are not correctly accounted for impacting on the customers’ ability to prepare statutory accounts.
- Best Practices for Audit of Accounts Payable
- Policy and standards for operation procedures for initiation, review and approval of all accounts payables expenditures to be placed and especially informed to accounts payable and other organisational staff.
- Roles and responsibilities to be clearly defined with adequate segregation of duties and approved ordering and payment authorisation limits.
- Require date stamping of invoices indicating actual time of receipt. This can help to identify process weaknesses.
- There is adequate control over the creation and amendment of creditor master-file data, particularly bank account details. This is an area of increasing fraud where organizations are mislead into changing supplier payment data and then make payments to fraudsters.
- To periodically review all debit balances and take any necessary action.
- Payment are authorised in accordance with procedures and invoice presented for payment which are incorrect, notify the party and intimate that it is corrected and resubmitted.
- The custody and handling of cheques and/or other negotiable instruments is secure and properly controlled.
- Reconciliations are timely and accurate, with any queries followed-up.
- Expense is handed over to the correct budget holder, area and expense type.
- Input to and output from electronic payment systems is adequately controlled.
- Mechanisms are in place to ensure that duplicate payments are avoided and/or detected.
- Ensure that invoice values paid are in accordance with contract prices.
- Ensure that credit notes are controlled and actioned.
- Availability of system generated reports that provide such statistics as average time to pay a supplier, trends, etc.