UK 'Paid Stamp' on invoices

[John Hardy]

Hi all,

Can someone tell me if its compulsory to have a "Paid Stamp" on a paid company invoice? Is it something auditors insist on during end of the financial year audits?

I'm guessing the "Paid Stamp" is recommended as a internal control more than anything else?

 

[TaxDevil]

As long as you have some way to show that the invoice was actually paid, you are ok. I use a Paid stamp as a quick visual reference but i go by Quickbook entries for reconciliation purpose.

 

[John Hardy]

Many thanks for your reply and help

 

[John Hardy]

As long as you have some way to show that the invoice was actually paid, you are ok. I use a Paid stamp as a quick visual reference but i go by Quickbook entries for reconciliation purpose.

The authorization stamp that goes on an invoice that includes the price, date, signature etc Are those thoroughly checked during an end of year financial audit to ensure everything's filled in/signed? Or is it case again as long as the you can show the invoice has been paid?

 

[Werner Reisacher]

Since you are mentioning the issue about the auditors, I assume, that your company is larger than an owner-operated small business. Whether invoices need to be "stamped" should be regulated in a company-wide "standard operating or procedure manual. This manual or procedure document should also cover issues related to the conflict of interest, bank, purchase, approval and signatory powers related to all - incoming and outgoing - information to and from third parties.
And since you are worried about the auditor's opinion, I think it is a good idea to ask them in the first place before you proceed with any changes.

 

[John Hardy]

Since you are mentioning the issue about the auditors, I assume, that your company is larger than an owner-operated small business. Whether invoices need to be "stamped" should be regulated in a company-wide "standard operating or procedure manual. This manual or procedure document should also cover issues related to the conflict of interest, bank, purchase, approval and signatory powers related to all - incoming and outgoing - information to and from third parties.
And since you are worried about the auditor's opinion, I think it is a good idea to ask them in the first place before you proceed with any changes.

Can you check an invoice to ensure everything is ok before handing it over to the auditor on the day of the audit?

 

[Fidget]

My advice would be that if audit ask you to provide whatever invoice, just give it to them.

 

[John Hardy]

My advice would be that if audit ask you to provide whatever invoice, just give it to them.

Whats the worst that can happen if somethings missing or is wrong with the authorization stamp details? Would an auditor just recommend better practice or something?

 

[Werner Reisacher]

In larger, and in particular, in public companies with large volumes, audits are carried out on the basis of "sampling methods". (picking 5 out of every 100 invoices". If the analysis of this sampling method reveals, that the overall error rate is above a certain percentage, the auditor will extend the sampling method to 10 out of 100 and so on, leading to a time consuming and expensive extension of the audit work. In the worst-case scenario, the audit will not be finished by the time the company needs to report its Financial Results to the Shareholders.
Depending on the overall severity of the "failed samples", the auditor will just mention the "lack of adherence to policies" in their letter to Management, or - since their reputation and liability is at risk - outright refuse to give the company a clean bill of health. (the company does not pass the audit)
Whichever way it turns out, personal consequences to the mangers in charge of departments involved must be expected. Unfortunately, more often than not, the Accountant will ultimately be declared the culprit, since Accounting's job is in charge of the Financial
Results.

 

[John Hardy]

In larger, and in particular, in public companies with large volumes, audits are carried out on the basis of "sampling methods". (picking 5 out of every 100 invoices". If the analysis of this sampling method reveals, that the overall error rate is above a certain percentage, the auditor will extend the sampling method to 10 out of 100 and so on, leading to a time consuming and expensive extension of the audit work. In the worst-case scenario, the audit will not be finished by the time the company needs to report its Financial Results to the Shareholders.
Depending on the overall severity of the "failed samples", the auditor will just mention the "lack of adherence to policies" in their letter to Management, or - since their reputation and liability is at risk - outright refuse to give the company a clean bill of health. (the company does not pass the audit)
Whichever way it turns out, personal consequences to the mangers in charge of departments involved must be expected. Unfortunately, more often than not, the Accountant will ultimately be declared the culprit, since Accounting's job is in charge of the Financial
Results.

Thanks for your response. My company is small to medium sized with about 100 employees. There is 100's of invoices per year rather than 1000's of invoices per year. Overall, there possibly might be only 5/6 invoices without "paid stamps" or missing info from an "authorization stamp". Would a missing "Paid Stamp" or details from a authorization stamp really lead to a "failed sample"?

 

[Werner Reisacher]

If you have a professional auditor, they will ask you to give them access to the filing cabinets and/or hand them the file in which the paid invoices are filed. The purpose of auditors verifying "cherry-picked" documents selected in the sampling is to enable them to express an independent unbiased opinion. Think about auditing a cashier's cash book. If they asked the cashier to prepare the documents they identified for their review, do you think they would find any compromising evidence?

 

[Fidget]

Whats the worst that can happen if somethings missing or is wrong with the authorization stamp details? Would an auditor just recommend better practice or something?

Yep, pretty much. The main thing is showing in one way or another that an invoice has been authorised for payment by an authorised signatory whether that's a sig on the face of the invoice or via email. So I wouldn't be getting all concerned about boxes on stamps.

 

[John Hardy]

Yep, pretty much. The main thing is showing in one way or another that an invoice has been authorised for payment by an authorised signatory whether that's a sig on the face of the invoice or via email. So I wouldn't be getting all concerned about boxes on stamps.

Thanks for that.

That’s what I’m concerned about, a missing authorised signature on an invoice. If a missing signature was found by an auditor would he/she be satisfied on the day of the audit the issue being rectified? i.e. finding out who authorised payment and getting them to sign the invoice.

What’s the worst that can happen if a signature was missing? Recommend better practise?

 

[Fidget]

It would be a bit late in the day to get it signed because it's already been paid.

What they might do is extend the sample of invoices to see if they find any more that haven't been authorised and check any unauthorised ones to confirm that they are for bona fide transactions. They might also increase audit testing in other areas since if there's a hole in this process, there might be holes in other processes. Or they might not do any of that if they don't think it's necessary.

At the end of the day, they'd probably just recommend that controls are reviewed.

The absolute worst that can happen in the audit of *any* company is that the financial statements and controls are such a mess that the auditors are unable to form an opinion on the financial statements. It's called "Disclaimer of opinion", and it certainly *is not* going to happen over a missing signature here and there.