Common Audit Failures - Payable

Common Audit Failures - Payable

  1. No request of confirmation from significant payable

  2. No alternative procedure for confirmation requested without reply

  3. No search for unrecorded liabilities

  4. No assessment of unrealized foreign exchange gain or loss

  5. No verification of significant other payable and accrual.

Practical Proposals

Trade payables balances which have remained unpaid in the books for more than a year should be investigated to determine its validity and existence.

Significant balances which remain unpaid could pose a risk to the company as this could result in litigation against the company. This could also be an indicator of cash flow problems in the company and going concern uncertainty if major suppliers impose credit restrictions on the company thereby affecting the operations of the company.

Auditors should also review the legal files of the company and ascertain from the directors of the company whether the company has been sued by creditors or other third parties which could threaten the operations of the company.

The auditor should determine whether unrecorded liabilities are taken up in the books of the company and whether adequate disclosure, if appropriate, has been made in the financial statements.

Legal Files

Auditors should also review the legal files of the company and ascertain from the directors of the company whether the company has been sued by creditors which could threaten the operations of the company.

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