Question

Because of several miscellaneous errors over occurring over a number of years, the total of the outstanding vendor payable balances shows a large discrepancy from the balance reflected in the general ledger. what control plan would prevent this?

Answer 1

To prevent discrepancies, a control plan called reconciliation can be implemented to match vendor statements with the general ledger. Segregation of duties and regular monitoring and review are other control plans that can help prevent errors.

Step-by-step explanation:

To prevent discrepancies between the outstanding vendor payable balances and the balance reflected in the general ledger, a control plan called reconciliation can be implemented. Reconciliation involves comparing and matching the vendor statements with the balances recorded in the general ledger. This ensures that all payments made to vendors are accurately recorded and any errors or discrepancies are identified and rectified.

Additionally, implementing segregation of duties is another control plan that can help prevent errors. This involves separating the tasks and responsibilities related to vendor payments among different individuals or departments. For example, one person can be responsible for recording vendor invoices, another person for approving payments, and a different person for reconciling vendor statements and the general ledger. This segregation of duties reduces the chances of errors or fraudulent activities going unnoticed.

A third control plan that can be implemented is regular monitoring and review. This involves consistently reviewing vendor payable balances and conducting periodic audits to ensure accuracy. By conducting reviews and audits, any errors or discrepancies can be identified and resolved in a timely manner.