Accounts Payable (A/P)
Accounts Payable (A/P) — the amount that you owe as a business to your creditors when you purchase on credit. There are also accounts receivable (A/R), which are the amount of credit that your clients owe you. As the operations grow, usually A/P become a job for a separate accountant.
What qualifies as A/P?
As soon as you get an invoice for a product or service and before you pay for it, this amount becomes an accounts payable. It gets registered in the General Ledger or AP subledger as a liability, or a form of credit that your suppliers provide. In accounting, the invoice is usually matched to the packing slip and purchase order to confirm that the operation indeed has taken place, before paying the outstanding amount.
What do the A/P auditors look for ?
To perform an audit of accounts payable the controller typically looks at the way the paperwork is organized. Every operation should have the supporting documents: approved invoice, expense reports, etc, to validate the expenses. It is crucial to have documents confirming the operation from the supplier or service provider as they serve as a proof that the exchange has taken place. If some or all of these documents have been lost, the auditor might decide to expand the investigation to a larger sample size.