Tuesday, August 14, 2012

A Lesson In Auditing

Accounts payable.  Every first year audit dweeb's dream come true *sarcasm.  Nothing better than auditing cash.  LOL.  I crack myself up just writing these lies.

AP is money that a company owes to vendors or services for whom they have purchased something but not yet paid at the end of the year.  The risk with AP is completeness since it's a liability and most companies will want to understate their liabilities (rare example is smoothing income, making it seem they did not make as much money as they did right away by overstating your AP).

So newbies always got the joy of testing AP.  They'd make a selection of large payments made from the check register after year-end and ask for documentation which could be the invoice, the receiving warehouse packing documents (to see when it was actually received if an item) and sometimes even the PO (but really, who cares about the order information unless you're also testing that some control ensures all the info matches from cradle to grave).  Service invoices are the easiest - you just check to see when the service was for and if it was before year-end, it should have been a liability even though they paid for it after the year-end date.  If it was after year-end, it shouldn't have been.  Items are a bit trickier.  For example, a company may have ordered a new printer on December 20th, 2011 and received the item on December 22nd, 2011... but the payment terms are 30 days, so the invoice was dated December 20th and would not be paid until January 2012, BUT it is an item you own as of December 22nd as it's yours.  The auditor would pick then say - have you included this in your AP total and have to ask for a painfully detailed listing of what makes up the AP total and make sure this item was on there.  It could also have been accrued for separately but that accrual listing would also have to add to the AP listing to be the AP amount on the financials.  Fun stuff right?  SO MUCH!

Well, cash wasn't any better, except cash taught me about the Controller's website (at least in California) where you could see if anyone owed you money.  This means their AP got so old because you never deposited some rebate or money you got a check for, and then they gave it to the state.

I forget about this website often - but it's fun to go back and check it frequently.  If you don't live in California, you should check to see if there's a similar website for your state.  I check it whenever I remember and always find money I haven't deposited (lost in mail, lost at home, etc.).  I just recently found over $400 for my parents that they forgot to deposit from rebates.  And if you're wondering how this all came about - I was telling my brother about how AP works for a company since he found a very old check from a company he used to work for that he had not yet deposited and was not sure if it was still valid.  Yeah, it doesn't work the same with personal checks.  If you lost it.. your bad!

CA Unclaimed Property Search

1 comment:

Traci said...

Thanks for telling me about your blog! I've had fun reading back through some of your posts. I love your writing. It will be fun to keep in touch this way!