These procedures are performed in order to audit AP data integrity and to confirm that all transactions entered during the day have been correctly posted to the general ledger. These procedures must be performed at the end of the day, or at the beginning of the next day after all invoice entry and payment processing for the date being balanced has been completed, and before any activity for the next day has been processed. To audit accounts payable activity, you must perform two major steps. These are.
• Proving that the beginning sub-ledger balance (total of all open invoices as of the last report with a valid cutoff date) plus the net accounts payable activity for the current day equals the ending sub-ledger balance for the day. This process is referred to as balancing the sub-ledger.
• Proving that the ending sub-ledger balance equal the accounts payable control account balance in the general ledger. This process is referred to as balancing the control account. The Accounts Payable System posts all invoice entry and payment activity to the General Ledger on an on-line basis, so the accounts payable sub-ledger balance should match the control account balance in the general ledger at any point in time. By producing a report with a valid cut-off and comparing the report balance to the balance in the general ledger control account at the proper time, you can verify that all accounts payable transactions are being correctly transferred to the general ledger.
The auditing procedures listed here may be performed at the end of each day after all activity for the day has been processed, or the following morning, if a valid sub-ledger report and a trial balance were produced at the end of the prior day.
Note: Normally file copies of the Open or Aged Accounts Payable report, the other accounting valuation reports, and the general ledger trial balance, are produced automatically each night when no users are on the system. This process is accomplished by setting up the reports to run automatically in the Job Processor.