Audit Program for Trade Creditors
Condition Possible reason / risk
There are large number of unfilled order Goods have been received but have not been processed.
There is high incidence of returns to suppliers Inadequate provision for returns has been made.
Controls and procedures relate primarily to year-end adjustments.
There are defined cut off procedures specifically monitored by appropriate personnel.
Supplier statement reconciliation is regularly performed.
Unmatched goods received notes/receiving reports are followed up.
- Compare trade creditors, purchases and payments to prior periods and budgets seeking explanations for unusual items and significant variances.
- Review monthly movement of trade creditors in comparison to purchases and payments particularly around the period end.
- Analyses the turnover of trade creditor – ratio of creditors to total operating costs (ie not financing and investing activities) – and compare to prior periods and budgets, seeking explanations for unusual items and significant variances.
- Analyze the ratio of purchases in the last month of the period to total purchases.
- Review the gross profit margin achieved particularly around the period end and compare to prior periods and budgets seeking explanations for unusual items and significant variances.
- Review the ratio of individual expense accounts to sales or other appropriate base.
- Review invoices recorded after the period end and review subsequent cash payments.
- Enquire whether there are any significant purchase or expenses around the period end. Check that these have been accounted for in the correct period.
- Vouch a sample of goods received notes around the period end to ensure cut off procedures have been correctly applied.