Trade payables confirmation
It is not normal to undertake a trade payables’ confirmation for the following reasons:
1. For trade payables, much of the documentary evidence available is in the form of
third party sourced suppliers’ invoices and statements, in contrast to trade
receivables for whom most of the available documentation is prepared by the client.
2. Confirmation offers no assurance that unrecorded liabilities will be discovered
3. Examination of documentary evidence is usually a cheaper form of substantive
evidence than confirmation.
4. Although examination of third party sourced documentary evidence is less reliable
than confirmations received directly by the auditor, it usually provides sufficient
evidence.
A trade payables’ confirmation should be considered in the following situations:
– A substantial proportion of the company’s suppliers do not issue monthly statements.
– Statements from suppliers with whom the company does substantial business are
unexpectedly unavailable for the last month of the year.
– Only fax or photocopies of statements are available whose authenticity is doubtful.