## Audit of Trade Payables – Completeness Assertion

The completeness assertion asks: Have all liabilities that should be recorded actually been recorded?

For trade payables and other liabilities, understatement is the key risk — the entity may be incentivised to omit liabilities to show a better financial position.

### Audit Procedures

1. Purchase Cut-off Testing

For the last 5 invoices received before year-end and included in trade payables:
Verify goods were physically received before year-end (check gate entry/inward dates).
All goods received prior to year-end must be in both inventory and trade creditors.
For invoices received after year-end:
Check invoice dates vs gate entry dates — if goods arrived before year-end, the liability should have been recorded.

2. Sample Testing of Payables

Select purchase/expense entries from the accounts payable ledger.
Verify against supporting documents (purchase invoices, GRNs).
Confirm correct amounts and correct accounting dates.

3. Subsequent Period Vouchers

Review all material expense vouchers recorded after the balance sheet date.
Identify items that relate to the audit period — these should have been accrued.

4. Advance Receipts from Customers

Obtain customer-wise listing with ageing.
Verify underlying documentation.
Enquire about disputes — additional liability may need to be recorded.

5. Statutory Dues Reasonability

GST Payable: Apply applicable GST rate to last month's sales → compare to recorded GST liability. Investigate variances.
PF/ESI Payable: Apply applicable rate to employee benefit expense → compare to recorded liability.
Obtain challans for statutory deposits made after year-end; verify amounts deposited match liabilities recorded.
Prepare a complete list of statutory dues and consider CARO 2020 reporting requirements.

6. CARO 2020 Consideration

Under CARO 2020, the auditor must report on disputed and undisputed statutory dues outstanding for more than 6 months.

Worked example

### Example 1

Scenario (KMP Limited): The auditor selects a sample of 10 purchase invoices from November–March. For Invoice #47 (dated 28 March, ₹2,50,000), the gate entry shows goods arrived on 30 March but the invoice has not been recorded in trade payables.

Audit Finding: This is a completeness failure. The goods were received before year-end (30 March), so both inventory and trade creditors should include ₹2,50,000. Management must post an accrual entry.

Audit Implication: If similar omissions are found, the auditor should extend the sample and consider whether trade payables are materially understated.

### Example 2

GST Reasonability Test:

Sales for March = ₹1,00,00,000; applicable GST rate = 18%
Expected GST liability = ₹18,00,000
GST liability in books = ₹14,50,000
Variance = ₹3,50,000 (unexplained)
Action: Request management explanation. If unsatisfactory, insist on recording the additional liability and consider CARO 2020 reporting if dues are outstanding > 6 months.

⚠️ Common exam mistakes

Testing only the completeness of purchases without checking cut-off — recording a purchase in the wrong period is also a completeness error.
Ignoring subsequent period vouchers — post-balance sheet invoices for pre-year-end services are a classic completeness trap.
Not preparing statutory dues reasonability — this is a high-value procedure that catches understatement of GST, TDS, PF, ESI liabilities.
Forgetting CARO 2020 reporting obligations when statutory dues are overdue — this is a mandatory reporting requirement, not an optional observation.

Reference:

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