Audit Program For Accrued Expenses
. Is it timely? Expense reports from employees usually have submission dates, whether it’s week’s end or month’s end. Reports submitted substantially beyond these deadlines mean that not only is there extra expense incurred for the current period, but previous reports are inaccurate. The same holds true for invoices from vendors sent long after the sales transaction was processed. Old invoices are hard to verify, because the materials or goods covered may be long through a production cycle. Is it reasonable?
Accrual Accounting
The reasonability measure often depends on the nature of the business and even of the department. Sales staff frequently claim travel and entertainment costs, while production focuses on raw materials, and administration tends to expense office supplies. A production supervisor claiming airfare on an expense report may require different supporting documentation than a sales manager because travel is more unusual for the production department. The cost of airfare should be reasonable for the destination and flight service level that’s in keeping with the company’s allowed levels. Is it accurate? The astute auditor considers not only an expense total but unit quantities and costs as well.
Accrued Expenses Example
For example, a $5,000 office supply purchase may seem reasonable as a total, but if 500 reams of paper were ordered instead of the intended 50 reams, only a line item audit could catch a mistake that ties up funds for 10 months of paper stocks.