Reconciliation of Subsidiary Ledger with General Ledger

First step in the audit of accounts payable is to obtain a copy of the entity's
reconciliation of subsidiary ledger and general ledger. After obtaining the entity's reconciliation
schedule, the auditor should test the clerical accuracy ( e.g., footing, cross-footing) of the
schedule. The auditor then should review the reconciliation prepared by the entity between the
sub-ledger and the control account (i.e., general ledger), and investigate reconciling items,
particularly any unusual non-standard journal entries. One purpose of this procedure is to
determine whether the liability figure appearing in the statement of financial position agrees
with the individual items comprising the detailed records. Another purpose is to provide a
starting point for other substantive procedures.
One purpose of this procedure is to determine whether the liability figure appearing in
the statement of financial position agrees with the individual items comprising the detailed
records. Another purpose is to provide a starting point for other substantive procedures.

Purchase and Accounts Payable Cutoff

The primary purpose of cutoff tests for goods and services received as well as for
supplier credit memos is to verify that transactions are completely recorded in the correct
accounting period. In performing cutoff test, accounts payable and purchase cutoff is normally
conducted jointly in verifying the purchases (inventory) and payables recorded. The auditor
tests the accounts payable cutoff by performing the following procedures:
1. Obtain and examine invoices from suppliers and other entities and other documentation
supporting transactions recorded in the purchase journal and cash disbursements
journal immediately before and after the reporting date. Determine whether the
transactions were recorded in the proper period; and
2. Review cutoffs in related areas such as purchases and inventories, paying particular
attention to goods in transit.
Confirmation of Liabilities to Debtors

Confirmation of liabilities to debtors is considered to be less necessary as compared to

confirmation of receivables to customers because the auditors will normally find in the client's
possession externally created evidence such as vendor's invoices and statements that
substantiate the liabilities.