pexels photo 3772613

Substantive procedures for trade payables.

A trade payable is an amount billed to a company by its suppliers for goods delivered to or services consumed by the company in the ordinary course of business.

The following are substantive procedures for trade payable:

  • Obtain listing of trade payable from the purchase ledger. Cast it and agree to the control account and financial statements. Review reconciliation between control account and purchase ledger if difference exist.
  • Calculate creditor’s turnover ratio and compare with prior years. Investigate any significant differences
  • Review the list of trade payable against prior years to identify any significant variations/omissions.
  • Select sample of creditors from purchase ledger at year end (focusing on major suppliers, suppliers with long outstanding balances and suppliers with credit balances) and perform circulazation i.e sending confirmation latter. Perform alternative audit procedures in case of non response and additional audit procedures in case exception identified
  • Select sample of creditors from purchase ledger at year end and agree back to valid supporting documentations of goods received note (GRN) and purchase orders
  • Review whether effect of cut-off on purchase have been appropriately accounted for in the creditors.
  • Review the control account entries shortly before and after the year end for unusual items and investigate them
  • Review the cash payments after year end and trace to creditors at year end
  • Review debit notes after year end to identify any purchases transactions before year end which should be reversed.

Leave a Comment

Your email address will not be published. Required fields are marked *

%d bloggers like this: