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Table of Contents
Objectives, Scope & Procedures Performed
Executive Summary
Appendices
Appendix A: General Background
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This report provides management with information about the condition of risks and internal controls at a specific point in
time. Future changes in environmental factors and actions by personnel will impact these risks and internal controls in ways
that this report cannot anticipate.
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Determine if key financial and business controls exist and are operating effectively.
Scope
The scope of this audit includes a review of Accounts Payable processes, focusing on the following areas:
Invoice receipt.
Prioritization of payments.
Payment processing.
Record retention.
Interviewed key management and personnel regarding the accounts payable processes.
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Performed analysis on accounts payable transactions for the period (Month) XXXX through (Month) XXXX.
Evaluated the effectiveness and efficiency of business processes against Best Practices.
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Executive Summary
Internal audit reviewed the Accounts Payable function in (Month , Year). The objectives of this review were to
obtain an understanding of the key administrative, operational and financial processes relating to these functions,
evaluate the adequacy and effectiveness of the associated internal controls and to identify opportunities for
process improvements.
Overall, the control environment was in need of improvement. At the time of our review, Management had identified
weaknesses in controls and had begun to implement plans to improve the control environment as well as the
efficiency and business effectiveness of the process. These plans are summarized on page 6. We noted some
additional areas where controls could be enhanced or added - these are summarized below.
See the Detailed Issues & Observations section of this report (pages 7 - 20) for a detailed discussion of all issues
identified in this review and the management implementation plan to address each issue.
Observations/Issues
See Page
Timing
Q1,
XXXX
1.
2.
3.
Invoices should be recorded and processed on a timely basis (we noted numerous exceptions
in our testing).
4.
Not all receipts to support reimbursement of T&E expenses were submitted as required by
corporate policy (X reports out of XX tested did not contain all documentation).
10
Q2,
XXXX
5.
Password security for check printing applications does not conform to the Computer Security,
Audit and Control Policy.
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Q4,
XXXX
6.
Unit As petty cash ($X,XXX) balance is larger than necessary (management subsequently
decided to eliminate the fund)
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Q4,
XXXX
Priority:
5
Priority
Low
Medium
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Q2,
XXXX
Q1,
XXXX
High
Sample Internal Audit Report
Priority
See Page
Timing
Policies and procedures for key AP processes (e.g.. Wire transfers, signature approvals, check
signing, p-cards) should be formally documented and updated.
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8.
Invoice processing efficiency is not optimal due to a high volume of low-dollar invoices (XX% of
payments are under $XXX and account for less than X% of dollar value). Increased use of pcards, summary invoicing and invoiceless processing should be considered.
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9.
Excessive numbers of open purchase orders need to be closed (of XX,XXX open POs,
approximately X% are current)
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Q2,
XXXX
10.
Duplicate vendors exist in the vendor master file (due to access issues, which have now been
resolved).
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Q2,
XXXX
11.
Outstanding checks and reconciling items should be resolved in a timely manner (there is an
unreconciled difference of $XX,XXX and outstanding checks totaling $XX,XXX from XXXX and
XXXX)
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Q1,
XXXX
12.
Purchasing card limits should be followed or revised if they are not appropriate.
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Q1,
XXXX
13.
Credit memos (for returns, etc.) need to be properly communicated to appropriate AP personnel
and should be resolved in a timely manner (there are items dated to XXXX).
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Q1,
XXXX
14.
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Q1,
XXXX
Priority:
6
Low
Medium
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Q1,
XXXX
Q1,
XXXX
High
Sample Internal Audit Report
Observations/Issues
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Owner/Timing
(Owner Name)
Q1, XXXX
Observations/Issues
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Owner/Timing
(Owner Name)
Q2, XXXX
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Owner/Timing
(Owner Name)
Q1, XXXX
Owner/Timing
(Owner Name)
Q2, XXXX
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Observations/Issues
Owner/Timing
(Owner Name)
Q4, XXXX
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Observations/Issues
Owner/Timing
(Owner Name)
Q4, XXXX
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Observations/Issues
Owner/Timing
(Owner Name)
Q1, XXXX
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Owner/Timing
(Owner Name)
Q1, XXXX
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Owner/Timing
(Owner Name)
Q2, XXXX
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Owner/Timing
(Owner Name)
Q2, XXXX
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Owner/Timing
(Owner Name)
Q1, XXXX
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Owner/Timing
(Owner Name)
Q1, XXXX
Owner/Timing
(Business Owner)
Q1, XXXX
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Owner/Timing
(Owner Name)
Q1, XXXX
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Appendices
Processing Timeliness
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Improvement Recommended
Not Adequate
Where possible improvements can be made, a reference has been made to the Issues and Observations section, where
managements change implementation plan is described, along with the responsible party and estimated implementation
timing
Internal Control Practice
Rating
1.
2.
3.
AP and cash disbursements are properly matched to underlying documents and authorized
4.
5.
6.
7.
8.
General ledger accounts, AP accounts, disbursements and bank accounts are reconciled on a timely basis,
and reconciling differences resolved timely
Issue Ref.
3, 4, 5, 7,
12
NA
1, 2, 4
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9.
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3, 4, 13
9, 12, 13,
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5, 6, 10
1, 2, 4, 9,
10
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6, 8, 9, 10
If improvement can be made, a reference has been made to the Issues & Observations section, where managements change
implementation plan is described.
Best Practice
1.
2.
3.
4.
Implement rigorous, pervasive policies to protect against disbursement fraud and overpayments
5.
6.
Rating
Issue Ref.
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13
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5,7
1
8,9
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7.
Reduce processing costs and cycle times for smaller, recurring invoices as well as T&E report processing
8.
9.
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6
8,10
1
8
Rating:
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Company Practice
Good
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Moderate Use
Evaluation/Reference
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Limited/Some Use
Company Practice
Rating:
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Good
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Moderate Use
Evaluation/Reference
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5, 7
Limited/Some Use
Rating:
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Company Practice
Good
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Moderate Use
Evaluation/Reference
8, 9
Limited/Some Use
Rating:
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Company Practice
Good
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Moderate Use
Evaluation/Reference
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8, 10
Limited/Some Use
Company Practice
Rating:
30
Good
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Moderate Use
Evaluation/Reference
6
8
6
14
Limited/Some Use
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Purpose
Observations
2. Expense reports
Sampled XX expense reports to review
for the following:
Supporting documentation
Proper approval
Lag time between completion of trip,
submission of expense reports, and
processing of reimbursements
Existence of documentation
Existence of approval
Timeliness of submitting expense reports
and processing of reimbursements
3. Petty cash
Sampled XX petty cash
reimbursement requests to review for
the following:
Supporting documentation.
Proper approval.
Existence of documentation.
Existence of approval.
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No exception noted
Purpose
The tests were performed to evaluate the
following:
Accuracy of data.
Existence, timeliness and completeness of
reconciliation.
Existence of management review
Observations
5. Invoices
Sampled XX invoices to review for the
following:
Purchase requisition approval.
Invoice approval.
Two/three way matching.
Supporting documentation.
Payment of applicable taxes.
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Purpose
The tests were performed to evaluate the
following:
Existence of documentation.
Existence of approval.
Existence of taxes paid.
Observations
No exception noted
Accurate invoice
payments
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Supplier satisfaction as
reported on surveys
Effective supplier
relationships
Activity Measures
Outcome Measures
Generate PO
Generating Payments
Control Weaknesses:
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Expense Report
Processing
Expense Report
Posting
Control Weaknesses:
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