Receivables

Question 1

What are they key assertions?

Answer 1

• Valuation
• Existence

Question 2

What are the sources of evidence?

Answer 2

• Aged Receivables Listing
• Sales Invoices
• Goods Despatch Notes
• Receivables Circularisation Letters
• Post Year-End Bank Statements
• Policy for Allowance for Doubtful Receivables

Question 3

What are the procedures?

Answer 3

• Obtain the aged receivables listing, cast it and agree the total to the financial statements - accuracy & presentation.
• Agree the receivables ledger control account with the receivables ledger list of balances - completeness & existence.
• Select a sample of year-end receivable balances and agree back to valid supporting documentation, invoice, goods despatched notes and sales order - existence.
• Inspect after date cash receipts and follow through to pre year-end receivable balances - valuation, rights & obligations, existence.
• Select a sample of goods despatched notes (GDN) before and just after the year-end and follow through to the sales invoice to ensure they are recorded in the correct accounting period - completeness & existence (cut-off of revenue).
• Inspect the aged receivables report to identify any slow moving balances and discuss these with the credit control manager to assess whether an allowance or write-down is necessary - valuation & allocation.
• Inspect board minutes to assess whether there are any material disputed receivables that may require write off - valuation.
• Inspect a sample of post year-end credit notes to identify any that relate to pre year-end transactions to ensure that they have not been included in receivables - existence (occurrence of revenue).
• Calculate the average receivables collection period and compare this to the prior year, investigate any significant differences - completeness & valuation.