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How to prepare for your AP Audit: Achieve year-round ledger accuracy

This blog discusses the Accounts payable audit and how your team could reduce the worry that comes with them by increasing ledger accuracy through the year.
A person holds a magnifying glass up to a piece of paper. There is a calculator in the foreground. This is to signify a financial or AP audit.

It’s audit time in Accounts Payable. You’re worrying that you haven’t done enough to ensure accounting accuracy or to prevent fraud. 

You’re wondering how many duplicate invoices have slipped through. How much do your existing controls catch? Will the auditors will find something that you might have missed?

This blog will discuss financial audits and how they affect Accounts Payable. It will teach how you can ensure a higher level of accuracy in your ledgers year-round, and not have to worry about audits any more! 

What is a financial audit? 

An audit is the careful review of financial data and documents to check for strong internal controls and high accuracy. The Financial Reporting Council says: ‘The auditor’s objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes the auditor’s opinion.’ In other words, they’re they to make sure all the numbers add up. 

Your auditors are likely to look at your general ledger, balance sheet, income statement, purchase orders, supplier invoices, and cash flow statement, but can ask for more documents. They will match ledger transactions to figures, which can be via random selection or by a prescribed cut-off point. They’ll check for completeness, accuracy, validity, compliance, and proper disclosure.  

How does it affect Accounts Payable (AP)? 

AP often comes under much scrutiny in audits and can become the sole focus in some cases. Why? Accounts Payable deals with a vast number of payments going out of the business, and so their access is greater. A study by The Controllers Council found that 77% of occupational frauds came from accounting, operations, sales, executive/upper management, customer service, administrative support, finance, and purchasing. And among these, accounting and operations lead the way with 14% of cases. So, when auditors are looking for fraud, AP is in the firing line, alongside Accounts Receivable and Procurement. 

So it’s imperative that you keep your records valid, accurate, complete, and consistent. 

The added benefits of doing this more often are many. You can discover and prevent fraud faster, find duplicates and overpayments and prevent or recover them with speed. The knock-on effect of this is that your vendor relationships will improve. 

FISCAL's risk, duplicate invoice and fraud detection software example, analysing transactional risks in Accounts Payable and prevent overpayments or duplicate payments
FISCAL's transactional risk analysis software identifies errors to solve before your audit.

How can you ensure better accuracy in your transactions and suppliers? 

Here are 3 areas to look at to better prepare for audit: 

  • MSF/ Master vendor file cleanse 
  • Transactional analysis 
  • Statement reconciliation 

Now, we know it’s not as simple as that. Monitoring every transaction and manually combing through data is time-consuming, tedious and error-prone. To be frank, it’s not a strong control. Spot checks work well, but they don’t catch everything, do they? Our goal is to ensure higher ledger accuracy. But we can’t do that if we’re only covering 10% of our transactions. 

Instead, we recommend using an Accounts Payable risk analysis software to save time, check all transactions, and increase accuracy. Automating your pre-audit checks means that your team only need to follow up on the flagged exceptions or errors. Those could be duplicate payments, odd-looking values, or a missing credit.

How FISCAL can help you get ready for audit. 

FISCAL’s AI-powered risk analysis software can help you achieve higher ledger accuracy. It completes forensic analysis of your transactions and suppliers, checking them for a plethora of issues and comparing them against historical data. This allows your team to be faster and more effective in detecting and resolving exceptions. 

Here’s how we can help in those three key areas: 

  • Transactions: We track all your transactions for anomalies. 
  • Master supplier file: We identify similar or matching suppliers in your file. We can also check it for employee matches.
  • Supplier statement reconciliation: Automated, continuous reconciliation allows for high coverage of your suppliers, allowing you to discover more discrepancies, rebates, or credit notes. 

Ultimately, your team will be able to use the insights in the software to be more proactive in their approach. They’ll focus more on tasks that will increase accuracy, and in turn, protect working capital from overpayments. 

Final thoughts. 

There’s always an option to take this one step further. You can look over past data and current data within our software, so why not complete internal audits yourself? The benefit is that your transactions are up to date, and with continuous monitoring, you ensure they are always accurate. This gives you peace of mind that your ledger and Master Supplier File are clean, and you’re reassured that audits will go more smoothly as a result. 

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