Scribd Logo
Upload

Welcome to Scribd!

  • 124 views

    Internal Audit of Accounts Payable and Disbursement

    Uploaded by

    Jorese
    Accounts payable is the section of the accounting department responsible for processing invoices and bills from vendors for goods and services purchased on credit. An accounts payable is recorded when an invoice is approved for payment and entered into the general ledger. Payables are often categorized as trade payables for inventory, salaries and wages, and expense payables. Disbursements refer to money paid out by a company for items needed, such as purchasing inventory, materials, or utilities. Key internal control practices for disbursements include separating duties, maintaining accountability through authorization and approval, securing assets, and reviewing and reconciling invoices, orders and payments. Failure to follow these practices could result in unauthorized or fraudulent purchases, improper charges, lost discounts or

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd

    Internal Audit of Accounts Payable and Disbursement

    Uploaded by

    Jorese
    124 views10 pages
    Accounts payable is the section of the accounting department responsible for processing invoices and bills from vendors for goods and services purchased on credit. An accounts payable is recorded when an invoice is approved for payment and entered into the general ledger. Payables are often categorized as trade payables for inventory, salaries and wages, and expense payables. Disbursements refer to money paid out by a company for items needed, such as purchasing inventory, materials, or utilities. Key internal control practices for disbursements include separating duties, maintaining accountability through authorization and approval, securing assets, and reviewing and reconciling invoices, orders and payments. Failure to follow these practices could result in unauthorized or fraudulent purchases, improper charges, lost discounts or

    Original Description:

    Internal Audit of Accounts Payable and Disbursement

    Copyright

    © © All Rights Reserved

    Available Formats

    PPTX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Accounts payable is the section of the accounting department responsible for processing invoices and bills from vendors for goods and services purchased on credit. An accounts payable is recorded when an invoice is approved for payment and entered into the general ledger. Payables are often categorized as trade payables for inventory, salaries and wages, and expense payables. Disbursements refer to money paid out by a company for items needed, such as purchasing inventory, materials, or utilities. Key internal control practices for disbursements include separating duties, maintaining accountability through authorization and approval, securing assets, and reviewing and reconciling invoices, orders and payments. Failure to follow these practices could result in unauthorized or fraudulent purchases, improper charges, lost discounts or

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    124 views10 pages

    Internal Audit of Accounts Payable and Disbursement

    Uploaded by

    Jorese
    Accounts payable is the section of the accounting department responsible for processing invoices and bills from vendors for goods and services purchased on credit. An accounts payable is recorded when an invoice is approved for payment and entered into the general ledger. Payables are often categorized as trade payables for inventory, salaries and wages, and expense payables. Disbursements refer to money paid out by a company for items needed, such as purchasing inventory, materials, or utilities. Key internal control practices for disbursements include separating duties, maintaining accountability through authorization and approval, securing assets, and reviewing and reconciling invoices, orders and payments. Failure to follow these practices could result in unauthorized or fraudulent purchases, improper charges, lost discounts or

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 10

    Accounts payable

    * A section of the accounting department that is


    responsible for processing vendor invoices and
    other bills for goods and services that a company
    received on credit.
    * account credited usually for purchases of
    goods and services.
    *is money owed by a business to its suppliers
    shown as a liability on a company's balance sheet.
    An accounts payable is recorded in
    the Account Payable at the time an invoice is
    vouched for payment. Vouchered, or
    vouched, means that an invoice is approved
    for payment and has been recorded in the
    General Ledger. Payables are often
    categorized as Trade Payables, payables for
    the purchase of physical goods that are
    recorded in Inventory, Salaries and wages
    payables, and Expense Payables, payables for
    the purchase of goods or services that are
    expensed.
    Disbursements
    The act of paying out or disbursing money.
    Disbursements is an outflow of money from the
    company for the purchase of items that are needed
    and used by a company. This can be anything from
    purchasing inventory, raw materials, or even utilities.
    Some areas where disbursements occur
     Payroll - Payroll is a massive cash outflow and requires
    special attention.

     Purchasing - Flexible purchasing practices can help a


    company maintain and generate cash flow.

     Inventories - Inventories have several hidden costs that


    can drain cash flow. These costs include storage, insurance,
    spoilage, handling, taxes, and financing.
    2. Best Internal Control Practices for

    Separation of duties - To ensure proper separation of


    duties, assign related buying functions to different
    people. With proper segregation, no single person has
    complete control over all buying activities.
    Accountability, authorization, and approval - You
    maintain accountability when you authorize, review,
    and approve purchases based on signed agreements,
    contract terms, and purchase orders.
    Security of assets - Once you have received your
    purchased goods, secure the materials in a safe
    location. To ensure that your resources are accounted
    for, periodically count your inventory and compare the
    results with amounts shown on control records.
    Review and reconciliation - Practice timely review of
    supplier’s invoice, packing slips, and purchase orders.
    Check accuracy of the information for prior payment,
    correct quantity ordered, and price charged. Monthly
    ledger reconciliation enables you to find improper
    charges and validate appropriate financial
    transactions.
    3. What are the potential consequences if those practices are not
    performed?
    If duties are not separated:
    - Unauthorized or unnecessary purchases made
    - Improper charges made to department budgets
    - Excessive costs incurred
    - Goods purchased for personal use

    If accountability does not exist:


    - Unauthorized, unnecessary, or fraudulent purchases
    - Unauthorized work performed by suppliers
    - Lost supplier discounts due to late payments
    - Improper charges to incorrect account/ funds resulting in a
    misappropriation of funds
    If your assets have not been secured:
    - Theft of goods
    - Inventory shortages
    - Additional costs incurred for replacement of goods

    If review and reconciliation is not performed:


    - Improper charges to your department budgets
    - Disallowances resulting from costs charged to incorrect
    accounts/funds
    - Payments made for items or services not provided
    Internal controls for inventories
     Fence and lock the warehouse.
     Organize the inventory.
     Count all incoming inventory.
     Inspect incoming inventory.
     Tag all inventory.
     Standardize record keeping for inventory picking.
     Sign for all inventory removed from the warehouse.
     Audit the bill of materials.
     Trace extra requisitions and returns.
     Conduct a periodic obsolete inventory review.
     Conduct a periodic obsolete inventory review.
     Investigate negative-balance inventory records.
     Record scrap transactions.

    You might also like