How to perform an accounts payable audit: step-by-step guide

A CFO once summed up their biggest audit risk like this: “Nothing material ever went wrong — we just couldn’t prove it fast enough.” That gap between doing the right work and evidencing it is where many accounts payable audits fail.

An AP audit reviews processes, transactions, and controls to ensure liabilities are accurate, authorised, and recorded correctly. But today, it also tests whether finance operations can scale and stay resilient as volumes and automation increase.

As AP spreads across systems, integration alone doesn’t ensure audit readiness. Without orchestrated workflows, embedded controls, and system-generated audit trails, evidence fragments, exceptions grow, and audits slow into manual reconstruction exercises.

When AP is orchestrated end to end, audits become faster and predictable. Issues surface before cash leaves the business, evidence exists by default, and audits shift from disruption to a source of clear operational ROI.

What is an accounts payable audit?

An accounts payable audit is a structured review of an organisation’s AP processes, transactions, and controls to confirm that liabilities are accurate, complete, properly authorised, and recorded in the correct accounting period. The goal is to ensure that supplier invoices, automated invoice processing and payments are legitimate, correctly classified, and supported by sufficient audit evidence.

In practice, an AP audit examines how invoices move from receipt to approval, posting, and payment — including how vendor data is maintained, how approvals are enforced, and how payments are reconciled. For finance teams, a well-executed accounts payable audit helps surface errors, control gaps, and inefficiencies before they escalate into audit findings, compliance issues, or cash leakage.

Internal vs. external accounts payable audits

Accounts payable audits can be internal or external. While they share similar goals, their scope and purpose differ. Internal AP audits are run by finance, audit, or risk teams and focus on prevention and improvement. They identify control gaps, test processes, and strengthen audit readiness, with flexibility to target high-risk areas like vendor data, approvals, and manual overrides.

External AP audits are performed by independent auditors as part of statutory reviews. They rely on documented controls, system-generated audit trails, and transaction testing to confirm AP balances are fairly stated and controls operate consistently. Strong internal AP audits reduce friction in external audits by ensuring controls, documentation, and evidence are already in place as volumes and automation increase.

What Auditors Aim to Validate

Regardless of whether the audit is internal or external, auditors assess accounts payable against a set of core assertions:

• Accuracy
  Are invoices and e-invoices recorded at the correct amounts, including prices, quantities, taxes, and currency conversions?
• Completeness
  Have all valid supplier invoices and liabilities been captured, or are expenses understated due to missing or delayed postings?
• Authorisation and validity
  Were invoices properly approved according to company policy, supported by purchase orders or contracts where required, and paid to legitimate suppliers?

To validate these assertions, auditors review source documents (invoices, POs, contracts), approval records, system logs, and payment reconciliations. Increasingly, they expect this evidence to be traceable and system-generated, rather than manually assembled — particularly in environments using automated invoice processing, approval workflows, and three-way matching.

A clear understanding of what an accounts payable software audit is — and what auditors are trying to prove — is the foundation for performing one effectively. The next step is understanding why these audits matter beyond basic compliance.

Why accounts payable audits matter

Accounts payable audits go beyond compliance. They help protect financial accuracy, prevent avoidable losses, and ensure AP can scale as transaction volumes grow. When controls are weak, the impact is immediate: misstated liabilities, duplicate payments, approval gaps, vendor fraud, and time-consuming audit requests that distract finance teams from higher-value work.

Financial accuracy and reporting integrity
AP underpins expense recognition and liability reporting. Missing, misclassified, or late invoices distort margins and accruals. A strong accounts payable audit confirms that ledger balances are accurate and traceable to source documents and approvals—without reliance on manual spreadsheets or tribal knowledge.

Fraud prevention and cash leakage
AP is a common source of silent losses, from duplicate invoices and vendors to unauthorised bank changes and manual overrides. Effective audits identify leakage points, test preventive controls, and surface patterns that signal fraud risk before issues become material.

Compliance and regulatory risk
Auditors expect clear evidence that transactions are authorised, accurate, and properly recorded. AP audits reduce the risk of penalties, qualified opinions, and extended audit timelines by ensuring documentation is complete, consistent, and easy to retrieve.

Operational efficiency
Regular AP audits expose approval bottlenecks, inconsistent coding, and manual rework that create month-end pressure. Standardised processes and audit trails shorten audit cycles and free finance capacity for analysis rather than administration.

Leadership perspective
For CFOs and finance directors, strong AP audits reduce external audit risk, improve cash and forecast predictability, and support scalable growth without increasing exceptions or manual effort.

The governance gap behind finance analytics
As finance teams invest in analytics, automation, and AI, weak AP data governance limits ROI. Incomplete or manually reconstructed AP data undermines insight quality. Regular, well-designed AP audits enforce consistent controls and system-generated audit trails—creating a trusted foundation for scalable, data-driven finance.

Accounts payable audit trends for 2026

Accounts payable audits are getting more complex — not because the fundamentals have changed, but because how AP work gets done is changing fast. In 2026, auditors are navigating higher transaction volumes, more automation - especially invoice approval workflows automation - tighter compliance expectations, and leaner finance teams. The result: greater scrutiny of controls, audit trails, and exception handling, not just whether an invoice exists.

Increased reliance on automated, AI-supervised finance processes

More AP teams are automating invoice capture, coding, approvals, matching, and reconciliation — and layering in AI to flag anomalies, reduce manual work, and keep processes moving at scale. This shift changes what auditors expect to see.

Financial AI agents are increasingly orchestrating these workflows end-to-end—autonomously capturing data, applying accounting logic, escalating exceptions, and continuously learning from auditor feedback—raising the bar for transparency, controls, and explainability in AP processes. Want to see this in action? Check out Payhawk’s AI financial agent and how it delivers audit-ready automation at scale.

What this means for AP audits:

• Auditors increasingly expect system-generated audit trails (who approved what, when, and why) rather than evidence reconstructed manually.
• There’s more emphasis on control design, monitoring, and exception handling (e.g., how duplicates are prevented or flagged, how overrides are approved, and how anomalies are investigated).
• There’s less tolerance for undocumented manual workarounds — especially when the “standard” process is automated but teams occasionally bypass it.

Greater standardisation of transactional AP workflows

As AP technology and best practices mature, transactional workflows are becoming more uniform across industries: structured invoice intake, defined approval routing, policy-driven controls, and standard matching/reconciliation practices. In other words, “this is how modern AP is expected to run” is becoming more consistent.

What this means for AP audits:

• Auditors are more likely to benchmark your AP process against widely accepted best practices, not just internal policy.
• “We do it differently” becomes a weaker justification unless the alternative is clearly documented and controlled.
• Deviations from standard controls (e.g., frequent manual overrides, inconsistent approvals, or weak segregation of duties) attract more scrutiny.

Higher audit expectations due to finance talent shortages

Finance teams are being asked to do more with fewer resources. When experience is concentrated in one or two people, or processes rely on “how it’s always been done,” audit risk rises — and auditors know it.

What this means for AP audits:

• Stronger reliance on preventive controls (rules that stop errors before they happen) rather than detective controls that catch issues later.
• Less tolerance for person-dependent knowledge (e.g., “only Jane knows how to reconcile this”).
• Greater focus on segregation of duties, consistency, and repeatability — especially around vendor changes, approvals, and payment releases.

Increased scrutiny driven by regulatory uncertainty

Compliance expectations are rising and changing unevenly across regions — especially around invoice formats, tax documentation, retention, and reporting. As regulations evolve, audits often become more conservative.

What this means for AP audits:

• More conservative audit approaches and stronger documentation expectations.
• Greater emphasis on consistency and traceability across entities, systems, and geographies.
• Compliance becomes harder to maintain consistently across regions, increasing the need for standardised evidence and clear controls.

These trends are changing not only how often AP audits happen, but what auditors expect to see. Understanding what matters most to auditors is the next step.

Internal vs. external accounts payable audits

Internal and external AP audits often review the same data, but they serve different goals.

Internal AP audits are forward-looking and improvement-focused. They test whether AP controls work as intended, using a flexible, risk-based scope that targets areas like vendor data, approvals, overrides, and duplicate payments.

External AP audits are statutory and assurance-driven. Independent auditors assess whether AP balances are fairly stated and compliant, based on materiality and regulatory requirements. Their focus is evidence, not process improvement — and findings can have direct consequences.

The key difference is proof. Internal audits may accept practical explanations; external auditors require consistent, system-generated evidence traceable from invoice to payment.
Strong internal AP audits don’t replace external audits — they make them faster, smoother, and more predictable.

What is important for auditors when it comes to an accounts payable audit

Auditors focus on what can be proven, not how much effort was involved. Shifting from “what we do” to “what we can evidence” is key to avoiding findings.

Core audit assertions auditors test

Auditors assess AP against a small set of assertions:

• Accuracy – Invoices are recorded at correct amounts, including prices, taxes, quantities, and currency.
• Completeness – All valid invoices and liabilities are captured without material omissions or delays.
• Cutoff – Invoices and payments are recorded in the correct accounting period.

Weak or unclear evidence against these assertions leads to expanded testing.

High-risk areas auditors scrutinise most

Auditors consistently focus on areas with higher error or fraud risk:

• Vendor master data – Duplicate or inactive vendors; unauthorised bank changes.
• Invoice approval workflows – Missing, late, overridden, or non-policy approvals.
• Three-way matching – Invoices paid without PO and receipt confirmation where required.
• Payments and reconciliations – Duplicate payments, timing issues, unreconciled balances.
• Segregation of duties – One person controlling vendor setup, approvals, and payments.

Understanding these priorities helps teams prepare evidence that holds up under scrutiny.

How to perform an accounts payable audit (step-by-step)

This framework supports both internal reviews and external audit preparation.

Phase 1: Plan and scope the audit

Define scope, objectives, and risk focus.

Key actions:

• Set audit scope, materiality, and timelines
• Identify high-risk areas based on history or change
• Gather core documentation (policies, approvals, prior audits)
• Clear scoping prevents over-testing.

Phase 2: Understand the AP process and controls

Map how AP actually operates from invoice receipt to payment.

Key actions:

• Walk through intake, approval, matching, posting, and payment
• Identify control points and manual steps
• Document exceptions and handoffs
• This sets the baseline for testing.

Phase 3: Evaluate internal controls

Assess control design and consistency, prioritising preventive controls.

Key actions:

• Review approval thresholds and workflows
• Assess segregation of duties
• Evaluate controls over master data, overrides, and reconciliations
• Weak controls drive deeper audit testing.

Phase 4: Test and review master data, invoices, and payments

Validate outcomes through testing and analysis.

Key areas:

• Duplicate or high-risk vendors
• Three-way matching compliance
• Approval and policy adherence
• Duplicate or unusual payments
• Period-end timing and cutoff
• Testing should be risk-based.

Phase 5: Report findings, remediate, and track actions

Turn findings into improvements.

Key actions:

• Classify issues by severity
• Identify root causes
• Assign actions, owners, and timelines
• Track remediation and retest
• Effective reporting improves outcomes, not just documentation.

What audit evidence should you collect?

Auditors assess whether results are supported by sufficient, appropriate evidence.

Source documents

• Invoices, POs, contracts, credit notes
• Evidence that amounts and terms match agreements

Documents must be complete, legible, and traceable to the ledger.

System logs and approval records

Workflow logs and user activity show who approved what, when, and under which policy — critical for authorisation, segregation of duties, and exception handling.

Exception and reconciliation reports

Auditors rely on:

• Duplicate invoice and payment reports
• Bank and AP reconciliations
• Override and exception logs

These demonstrate issues are identified and resolved.

Why evidence sufficiency and quality matter

Manually reconstructed evidence increases effort and risk. System-generated audit trails reduce follow-ups and shorten audits.

Accounts payable audit key checklist

Ensure core risks are covered:

• Vendor validation – Approved, legitimate, up to date
• Invoice accuracy and approval – Correct amounts and policy alignment
• Duplicate payment detection – Preventive and detective controls
• Audit trail completeness – End-to-end traceability
• Exception handling – Documented resolution

A concise checklist supports year-round audit readiness.

Risk assessment and tailored audit procedures

Not all AP transactions carry the same risk.

Identifying high-risk transactions and vendors

Focus on:

• New or changed vendors
• High-value or high-volume suppliers
• Manual invoices, overrides, urgent payments

Adjusting audit depth based on risk

High-risk areas require deeper testing; low-risk areas may need limited review.

Preventing one-size-fits-all audits

Risk-based audits reduce unnecessary effort and improve insight.

Common AP audit findings (and how to prevent them)

Recurring findings include:

• Duplicate vendors or payments – Strengthen master data and detection
• Missing approvals – Enforce policy-driven workflows
• Manual overrides – Restrict and document exceptions
• Weak segregation of duties – Separate critical roles
• Incomplete documentation – Centralise and standardise evidence

Proactive controls reduce repeat findings.

Best practices to improve AP audit readiness

Audit readiness supports scalable growth, not just compliance.

Best practices:

• Standardised AP policies across entities
• Strong approval enforcement
• Clear, system-generated audit trails
• Continuous monitoring
• Reduced manual intervention through automation
• Regular training and internal reviews
• Accurate, timely supplier payments

AP audits vs. AP automation

Audits and automation are complementary:

• Audits validate accuracy, compliance, and evidence.
• Automation executes processes consistently and creates audit trails.

Automation supports audits but doesn’t replace audit judgement or testing.

Building audit-ready accounts payable that scales

Accounts payable audits are no longer annual checkboxes. They’re a core control for accuracy, compliance, and scalable finance operations.
Book a demo with Payhawk to see how accounts payable workflows, approvals, and audit trails can be managed end to end — with controls, visibility, and audit readiness built in from day one.