Post audit definition

What is a Post Audit in Capital Budgeting?

Post audit refers to an analysis of the outcome of a capital budgeting investment. This analysis is conducted to see if the assumptions incorporated into the original capital proposal turned out to be accurate, and whether the project outcome was as expected. The results of this audit are then incorporated into future capital budgeting decisions, thereby improving the decision-making process. A post audit may also be used to see if any managers who submitted budget proposals might have deliberately inflated the benefits to be derived from their proposals.

What is a Post Audit in Accounts Payable?

Post audit can refer to an analysis of a supplier’s relationship with a customer, by the customer’s internal audit team. The focus of this audit is on whether the supplier is dealing with the customer in a fair and equitable manner. Here are some of the issues that a payables post audit might address:

  • Allowances not given. Has the supplier ignored any allowances that should have been granted to the customer?

  • Pricing differences. Are there unexplained differences between the prices quoted to the customer and the prices actually charged to it?

  • Shipments not combined. Did the supplier have the opportunity to combine shipments to the customer and did not do so, thereby charging more freight costs to the customer?

  • Excessive defects. Did the supplier ship goods to the customer that were unusually defective in relation to normal quality standards?

The outcome of a payables post audit can be a retroactive charge to the supplier, or the decision to stop doing business with the supplier entirely.

Related AccountingTools Course

Capital Budgeting