Internal Audit Checklist
Part B – Internal Audit of Specific Functions – IV
(7) Checklist for Payables
Value of all payable should be equal to all purchases of goods/ services value of the organization.
Documentation
(I) A sufficient and appropriate record of the basis of an internal audit report.
(ii) Evidence that the internal audit was performed in accordance with Ass and SAs and other applicable legal and regulatory framework
Legal Compliance
(I) Internal auditors must ensure that organisation has complied with the legal requirement of the Central and State laws related to GST, Excise Act, Micro, Small and Medium Enterprises Development Act, 2006, Limitation Act, 1963 and other laws.
Authorisation Matrix
(ii) Internal auditor must ensure that all documents entered in accounts with respect to recording of purchases of goods/ services and payables must be authentic and authorized by respective officers of the organisation.
Compliance with Accounting Standards and Standards on Auditing
(iii) AS 2 Valuation of Inventories
(iv) SA 265 Communicating Deficiencies in Internal Control to those Charged with Governance and Management.
Procedures/ Controls
Following steps may be taken for internal audits of payables:
(I) Trace Payable Report
(ii) Investigate Reconciling Items
(iii) Test Verification of Invoices
(iv) Match Invoices to Goods In-ward Register
(v) Ascertainment of Number of Accounts for Verification
(vi) Confirm Accounts Payable
(vii) Review Payment Receipts
(viii) Assess Doubtful Accounts
(ix) Review Credit/Debit Note
(x) Bill and Hold Purchase (Bill for purchase but goods have not been received)
(xi) Purchase Return
(xii) Related Party Payables
(xiii) Trend Analysis (Review of purchase and accounts payable)
Recording of Transactions
Quality/ Good Governance
Reporting
(I) Preliminary Audit Report (Sent to Proprietor/Designated Partner/MD/COO as a confidential document)
(ii) Final Audit Report (Combination of the preliminary audit report and response into one document)
(8) Checklist for Receivables
The value of all receivables should be equal to all sales/services/revenue values of the organization.
Documentation
(I) A sufficient and appropriate record of the basis of an internal audit report.
(ii) Credit policy of the organisation, Performa invoice, Purchase Order of the customer, Sales order, Copy of invoice and documents evidencing the delivery to the customer.
Legal Compliance
(I) Internal auditors must ensure that organisations must comply with the legal requirement of the Central and State laws related to GST, Excise Act, MSMED Act, and other laws.
Authorisation Matrix
(ii) Credit limits and terms.
(iii) Bad debts provision and write-off
(iv) Credit note issue.
Compliance with Accounting Standards and Standards on Auditing
(I) AS 9 Revenue Recognition
(ii) AS 18 Related Party Disclosure
(iii) AS 1 Disclosure of Accounting Policies
(iv) SA 265 Communicating Deficiencies in Internal Control to those Charged with Governance and Management
Procedures/ Controls
Following steps may be taken for internal audits of payables:
(I) Trace Receivables Report
(ii) Investigate Reconciling Items
(iii) Test Verification of Invoices
(iv) Match Invoices to Dispatch Log
(v) Ascertainment of Number of Accounts for Verification
(vi) Confirm Receivable Balance
(vii) Review Payment Receipts
(viii) Assess Doubtful Accounts
(ix) Review Credit/Debit Note
(x) Invoices and Hold sales/ services/ revenue
(xi) Sales/Services/Revenue Return
(xii) Related Party Receivables
(xiii) Trend Analysis
(xiv) Segregation of Duties
Recording of Transactions
Quality/ Good Governance
Reporting