Download - RECEIVABLES
RECEIVABLESRECEIVABLES
Chapter 11
Juan M. Garcia Merced
Cont 4017
CPA Juan M. Garcia Merced
Sources and Nature of Sources and Nature of ReceivablesReceivables
Includes claims against customers, loan to officers, loans to subsidiaries, tax refunds, advances to suppliers, notes, and insurance claims.
CPA Juan M. Garcia Merced
Auditor’s Objectives - Auditor’s Objectives - ReceivablesReceivables
Substantiate the existence of receivables and the occurrence of revenue transactions
Establish the completeness of receivables and revenue transactions
Verify the cutoff of revenue transactionsDetermine that the client has rights to
recorded receivablesEstablish the proper valuation of receivables
and the accuracy of revenue transactionsDetermine that the presentation and disclosure
of receivables and revenue are appropriate
CPA Juan M. Garcia Merced
Audit Time for ReceivablesAudit Time for Receivables
Auditors devote a larger proportion of the total audit hours to receivables due to materiality and audit risk considerations.
Receivables are an integral part of revenue recognition and net income.
CPA Juan M. Garcia Merced
Audit Program Audit Program – Substantive – Substantive Procedures for Procedures for ReceivablesReceivables
CPA Juan M. Garcia Merced
Obtain an aged trial balance of Obtain an aged trial balance of receivables and trace or reconcile receivables and trace or reconcile to the general ledgerto the general ledger
CPA Juan M. Garcia Merced
Obtain analyses of notes Obtain analyses of notes receivable and related interestreceivable and related interest
Note receivable
Amount Interest Due date Collateral
Yale, Inc. $10,000 8% 12-31-2003 None
Mr. White $ 3,500 12% 06-30-2004 None
$13,500
CPA Juan M. Garcia Merced
Confirm receivables with debtors Confirm receivables with debtors – Positive or Negative – Positive or Negative ConfirmationsConfirmations
CPA Juan M. Garcia Merced
Our auditors, [Name], are conducting an audit of our financial statements. Please confirm the balance due our company as of [Date], which is shown on our records as $ .
Please indicate in the space provided below if the amount is in agreement with your records. If there are differences, please provide any information that will assist our auditors in reconciling the differences. Please also indicate any special sale or payment terms related to this balance. f
Please mail your reply directly to [Audit Firm’s Name and Address] in the enclosed return envelope. PLEASE DO NOT MAIL PAYMENTS ON THIS BALANCE TO OUR AUDITORS.
Very truly yours,
[Officer’s Signature and Title]
________________________________________________________________________________________
[Client’s Name]
To [Audit Firm’s Name]d
The balance due [Client’s Name]d of $ d as of [Date]d is correct with the following exceptions (if any)
_____________________________________________________________________________________________________
_________________________________________________________________e
Signature _______________________Title _ eDate _______ e
Positive Positive ConfirmationsConfirmations
CPA Juan M. Garcia Merced
Negative ConfirmationNegative ConfirmationOur auditors, [Name], are conducting an audit of our financial statements. Our records show an amount of
$ d due from you as of [Date]. If the amount is not correct, please report any differences directly to our auditors, [Audit Firm’s Name and Address], using the space below and the enclosed return envelope. NO REPLY IS NECESSARY IF THIS AMOUNT AGREES WITH YOUR RECORDS. PLEASE DO NOT MAIL PAYMENTS ON ACCOUNT TO OUR AUDITORS.
Very truly yours,
[Officer’s Signature and Title]
______________________________________________________________________________
[Company Name]
Differences Noted (If Any)
The balance due [Client’s Name]d of $ d at [Date]d does not agree with our records because (no reply is necessary if your records agree).
______________________ e
Signature
Title _______________________e Date ____________________e
CPA Juan M. Garcia Merced
Review the year end cut-off of Sales Review the year end cut-off of Sales TransactionsTransactions
CPA Juan M. Garcia Merced
Perform analytical reviews for Perform analytical reviews for accounts receivables, notes and accounts receivables, notes and revenuesrevenues
Gross profit percentage
Accounts receivable turnover
Number of days in receivables
Sales comparisons per month
Sales per square foot
CPA Juan M. Garcia Merced
Determine adequacy of Determine adequacy of allowance for uncollectible allowance for uncollectible accountsaccounts
CPA Juan M. Garcia Merced
Ascertain whether any receivables Ascertain whether any receivables have been pledgedhave been pledged
Review bank confirmations
Review legal letters
Review letters or confirmations from creditors
Read contracts
Read board of direct. minutes
CPA Juan M. Garcia Merced
Investigate any transactions with or Investigate any transactions with or receivables from related partiesreceivables from related parties
From directors, employees, affiliated companies, and determine whether the transaction were:
Properly authorized and recorded.
Adequately disclosed in the financial statements
CPA Juan M. Garcia Merced
Evaluate financial statement Evaluate financial statement presentation and disclosure of presentation and disclosure of receivables and revenuereceivables and revenue
CPA Juan M. Garcia Merced
Questions?Questions?