Accounts Payable Controls Checklist for Your Next Internal Audit

Accounts payable controls checklist

Internal controls are standard practices and procedures that reduce the risk of error and fraud and help ensure compliance with regulations. They’re necessary for every company and are usually implemented across all departments. Internal controls are an especially important part of accounts payable optimization, as the AP department has significant control over an organization’s funds. Without proper controls, your company can face a substantial risk of loss.

It’s a good idea to perform an internal accounts payable audit at least annually, as part of your year-end reporting procedures. You’ll want to follow some best practices, including detailed planning of what data you’ll need to collect during the audit, choosing the right team members to get involved, documenting your results, and making sure to effectively follow up on any control issues that are identified.

1. Obligation to Pay Controls

Obligation to pay controls help your company immediately identify potential issues in the acquisition and payment process. These controls ensure that payments are made only for goods received or services rendered.

Purchase Order Approval

A department generates a purchase order within the business as a request for goods or services. The document details the vendor name, goods or services requested, and purchase price. Purchase orders should require approval from an authorized party before sending the request to the vendor.

Authorization of the purchase order ensures that spending is controlled and that the organization only pays for necessary goods and services. However, some companies allow the requesting individual or department to generate and send purchase orders under a specific dollar amount without approva