Tutorial 7 Flashcards
(8 cards)
What is a supplier statement reconciliation, and why is it important?
It compares the supplier’s statement to the client’s payables ledger to verify completeness, existence, and accuracy of liabilities. It is a strong source of audit evidence for identifying timing differences or errors.
What are two common causes of differences in a supplier statement reconciliation?
- Timing differences – e.g. invoices or payments recorded by one party but not the other
- Errors – e.g. transposition or omitted invoices
What audit work should be done when there’s a possible disallowed early payment discount?
- Enquire with the payables department and inspect correspondence.
- Check bank statements for date of clearance.
- If discount was taken but not allowed, it must be added back to payables.
What should an auditor do if there’s a possible transposition error on an invoice?
- Inspect the original invoice.
- If the supplier’s figure is correct, adjust payables to reflect the higher amount.
What if a supplier invoice is missing from the payables ledger?
- Enquire with the warehouse whether goods were received.
- Inspect GRNs and purchase invoice files.
- If goods were received but the invoice isn’t posted, accrue the liability.
- If goods were not received, no accrual needed, but evidence of the dispute should be retained.
What if goods were received before year-end but the invoice is dated after?
- Inspect the GRN date.
- If goods were received pre year-end, a purchase accrual should be made.
How should an auditor verify a cheque issued close to year-end (potential cash in transit)?
- Inspect the post-year-end bank statement.
- If the cheque clears within a week, it is valid cash in transit.
- If it takes longer or is inconsistent with other cheques, reverse the entry (i.e. put amount back in payables).
What is the correct treatment if a payment was not received by the supplier in time for a discount?
The discount must be disallowed and the full payable recorded
