Auditing Accounts Receivable & Sales (continued)

R & O-management asserts that company is entitled to the amounts reported as accounts
receivable

Inquire of management if accounts receivable have been pledged, assigned, or sold

Examine loan agreements for indications of accounts receivable financing

Examine minutes of meetings of board of directors for indications of accounts receivable

financing
V-management asserts that accounts receivable is reported at its net realizable value
 Inquire of management as to policies for collecting & writing off delinquent accounts
 Confirm balances in accounts receivable using positive or negative confirmations
 Compare amounts reported on confirmations to accounts receivable schedule
 Compare total of accounts receivable schedule to amount reported on balance sheet

 Recalculate balances of the allowance for uncollectible accounts & allowances for
sales
discounts & sales returns & allowances
 Examine the aged analysis to determine if allowances are reasonable

 Examine subsequent collections & shipping documents for receivables for which
positive
confirmations were not returned


Focus on
Evidence - Module 3 108

Auditing Accounts Receivable & Sales (continued)

 Apply analytical procedures to determine if accounts receivable balance is reasonable
in
relation to sales & other factors

C-management asserts that all amounts owed to the company resulting from sales on acco~nt
are included in accounts receivable & that all transactions related to sales & accounts receiv-
able were recorded in the appropriate period

 Compare shipping documents to amounts recorded as sales to determine if all sales

were recorded

 Examine numerical sequence of prenumbered shipping documents & invoices to

make
certain that all numbers are accounted for

 Examine shipping logs & shipping documents for shipments at or near year-end to
verify
appropriate cutoff

E or O-management asserts that amounts reported as accounts receivable exist & reported
sales transactions actually occurred

 Confirm amounts reported in accounts receivable using positive or negative

confirma-
tions

Focus on
Evidence - Module 3
109

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