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  • Auditing Accounts Receivable

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    s1mz
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    The document outlines an audit program for testing accounts receivable and bad debts. It lists five audit objectives: existence or occurrence, completeness, rights and obligations, valuation or allocation, and presentation and disclosure. For each objective, it identifies potential risks or errors and recommends generalized evidence-gathering procedures and substantive tests of transactions. The procedures include vouching, tracing, analytical procedures, confirmation, and recalculation to verify accounts receivable balances and ensure proper presentation and disclosure.

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    C.1 AP-2 AR Substantive Audit Program

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    The document outlines an audit program for testing accounts receivable and bad debts. It lists five audit objectives: existence or occurrence, completeness, rights and obligations, valuation or allocation, and presentation and disclosure. For each objective, it identifies potential risks or errors and recommends generalized evidence-gathering procedures and substantive tests of transactions. The procedures include vouching, tracing, analytical procedures, confirmation, and recalculation to verify accounts receivable balances and ensure proper presentation and disclosure.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOC, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    5K views3 pages

    Auditing Accounts Receivable

    Uploaded by

    s1mz
    The document outlines an audit program for testing accounts receivable and bad debts. It lists five audit objectives: existence or occurrence, completeness, rights and obligations, valuation or allocation, and presentation and disclosure. For each objective, it identifies potential risks or errors and recommends generalized evidence-gathering procedures and substantive tests of transactions. The procedures include vouching, tracing, analytical procedures, confirmation, and recalculation to verify accounts receivable balances and ensure proper presentation and disclosure.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOC, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 3

    PEACH BLOSSOM COLOGNE COMPANY

    SUBSTANTIVE AUDIT PROGRAM – ACCOUNTS RECEIVABLE AND BAD DEBTS


    AP-2
    Audit Objectives Potential Risks / Errors Generalized Evidence-Gathering Audit Substantive Tests of
    Procedures Transactions

    1 Existence or Occurrence • Unauthorized sales may •Examine the sales figures and • Account for a sequence of
    (None of the accounts have occurred accounts receivable, then match sales invoices
    receivable are fictitious) • Unauthorized write-offs them with source documents • Review sales journal and
    of receivables may have (Vouching) master file for unusual
    occurred •Pick a sample of source transactions and amounts
    documents and trace forward to • Trace sales journal entries to
    verify that the transactions related supporting documents,
    to accounts receivable exist including duplicate sales
    (Tracing)
    invoice, bill of lading, sales
    •Computation of sales and
    accounts receivable amounts and order, and customer order
    ratio analysis (Analytical • Observe surprise count.
    Procedures)
    • Send confirmation letter to
    related customers (Positive and
    negative confirmation)

    2 Completeness (No • Goods may have been • Send confirmation letter to Trace selected shipping
    accounts receivable have shipped but not billed to the related customers (Confirmation) documents to the sales journal to
    been omitted from the customer • Examine the accounts receivable ensure that each one is included
    balance sheet) • Sales may have been billed to figures and shipping notices
    the customer but not shipped (Vouching)
    • Merchandise may have been • Contact the related customers
    sold to customers who were (Verbal Inquiry)
    bad credit risks • Take a sample of related source
    documents (e.g. delivery order,
    shipping notice), then compare it
    PEACH BLOSSOM COLOGNE COMPANY
    SUBSTANTIVE AUDIT PROGRAM – ACCOUNTS RECEIVABLE AND BAD DEBTS
    AP-2
    to master file (Tracing)
    • Cut-off test (sales register and
    shipping records)
    3 Rights and Obligations Sales may have been recorded in • Take a sample of related source • Compare date of recording
    (The accounts receivable the wrong accounting period documents (e.g. delivery order, of sale in sales journal with
    are bona fide claims owed shipping notice), then compare it duplicate sales invoice and
    the company) to master file (Tracing)
    bill of lading
    • Compare sales and accounts
    receivable figures with prior years • Foot and cross-foot the sales
    (Analytical Procedures) journal and trace totals to the
    • Check whether there are any general ledger
    goods in consignment • Trace a sample of sales
    • Pledge any collateral goods invoices from sales journal
    to accounts receivable
    master file and test for
    amount, date, and invoice
    number
    4 Valuation or Allocation Sales amounts may have been • Perform recalculation of sales • Trace entries in sales journal
    (The accounts receivable incorrectly recorded transactions on aging receivable to sales invoices
    are collectible in the (Recalculation)
    normal course of business) • Compare the recalculation result • Recompute prices on sales
    with sales figure (Analytical invoices
    Procedures)
    5 Presentation and Sales may have been posted to • Review of account receivable Examine duplicate sales invoice
    Disclosure (Pledged the wrong account figures to ensure that they are for proper account classification
    accounts receivable or properly classified (Scanning)
    accounts receivable used • Disclose any troublesome
    as collateral are disclosed collectability
    and Receivables from
    PEACH BLOSSOM COLOGNE COMPANY
    SUBSTANTIVE AUDIT PROGRAM – ACCOUNTS RECEIVABLE AND BAD DEBTS
    AP-2
    directors, officers, and
    affiliates are separately
    disclosed)

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