The following are typical questions that might appear on an internal control questionnaire for accounts payable.
1. Are monthly statements from vendors reconciled with the accounts payable listing?
Monthly statements from vendors should be reconciled to the payables ledger.
2. Are vendors’ invoices matched with receiving reports before they are approved for payment?
The two procedures are test controls that provides auditors the evidence to access control risk of financial statements.
Required:
a. Describe the purpose of each of the above internal control activities.
b. Describe the manner in which each of the above procedures might be tested.
c. Assuming that the operating effectiveness of each of the above procedures is found to be inadequate, describe how the auditors might alter their substantive procedures to compensate for the increased level of the risk of material misstatement.
