Since the implementation of 2002’s Sarbanes-Oxley Act, most public companies need to submit their records for external auditing. Auditors check whether these records adhere to the standards specified in the Generally Accepted Accounting Principles (GAAP). Although compliance creates extra work for businesses, large-scale corporate scandals are much less likely to occur.
There’s no set way to perform an AP audit. Auditors pick their methods based on the size of a business and the desired thoroughness of the audit. The implementation of GAAP regulations varies per state, with some states allowing public companies to publish additional reports that don’t need to follow GAAP standards. Despite these differences, auditors look for completeness, validity, and compliance of records, and see if the AP balance was disclosed correctly on the year-end statement. Together, these confirm whether a company’s AP records present an accurate view of the business.
Audits in an Automated Accounts Payable Process
Audits can be as burdensome as outdated, manual accounts payable processes. Often an auditor will spend 2-3 days with a company, searching through file cabinets spilling over with paper invoices. In an automated system, however, it may only take 2-3 hours for an auditor to complete their task. By providing an auditor read-only access to your online portal, they can quickly search for invoices they’d like to review and immediately see the audit trail.
Accounts payable automation provides greater visibility into the entire audit process. There’s no such thing as a long paper trail: you simply log into your portal to see the whole history of any invoice — from receipt through payment. It makes it easier on your auditor(s), but more importantly, it makes it easier for you! And with cloud-based automation solutions, employees can access all data and applications from nearly anywhere, anytime, using many different electronic devices such as smartphones and PCs.
Still hesitant to let go of your paper records? Remember that paper only offers the illusion of control. Files can be misplaced, accidentally shredded, or lost. Paper is the antithesis of efficiency: It makes the invoice and payment process less visible, and thereby harder to track.