Why Does the Auditor Look at Cash Payments Made After Year-End?
Payments made after year-end can reveal obligations that existed before year-end but were never recorded.
Subsequent disbursements
The auditor reviews cash payments made after year-end and traces significant items back to supporting invoices and receiving information.
Why it works
A January payment may relate to goods or services received in December, meaning a year-end liability should have been recorded.
Other evidence
Unpaid invoices, vendor statements, unmatched receiving reports, and accrued-expense documentation can also support the search.
Assertion
This procedure is strongly associated with completeness because the concern is liabilities omitted from the records.
The takeaway
The search for unrecorded liabilities is primarily a completeness procedure for accounts payable and accrued liabilities.
Related Summit guides
FAQ
Is this mainly an existence test?
No. It primarily addresses completeness.
Can January payments reveal December liabilities?
Yes.
Are vendor statements useful?
Yes.