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RECEIVABLES

RECEIVABLES. Chapter 11 Juan M. Garcia Merced Cont 4017. Sources and Nature of Receivables. Includes claims against customers, loan to officers, loans to subsidiaries, tax refunds, advances to suppliers, notes, and insurance claims. Auditor’s Objectives - Receivables.

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RECEIVABLES

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  1. RECEIVABLES Chapter 11 Juan M. Garcia Merced Cont 4017

  2. Sources and Nature of Receivables • Includes claims against customers, loan to officers, loans to subsidiaries, tax refunds, advances to suppliers, notes, and insurance claims. CPA Juan M. Garcia Merced

  3. Auditor’s Objectives - Receivables Substantiate the existence of receivables and the occurrence of revenue transactions Establish the completenessof receivables and revenue transactions Verify the cutoff of revenue transactions Determine that the client has rightsto recorded receivables Establish the proper valuation of receivables and the accuracy of revenue transactions Determine that the presentation and disclosure of receivables and revenue are appropriate CPA Juan M. Garcia Merced

  4. Audit 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

  5. Audit Program – Substantive Procedures for Receivables CPA Juan M. Garcia Merced

  6. Obtain an aged trial balance of receivables and trace or reconcile to the general ledger CPA Juan M. Garcia Merced

  7. Obtain analyses of notes receivable and related interest CPA Juan M. Garcia Merced

  8. Confirm receivables with debtors – Positive or Negative Confirmations CPA Juan M. Garcia Merced

  9. 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 $das of [Date]d is correct with the following exceptions (if any) _____________________________________________________________________________________________________ _________________________________________________________________e Signature _______________________Title _eDate _______e Positive Confirmations CPA Juan M. Garcia Merced

  10. Negative Confirmation Our auditors, [Name], are conducting an audit of our financial statements. Our records show an amount of $ddue 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 $dat [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

  11. Review the year end cut-off of Sales Transactions CPA Juan M. Garcia Merced

  12. Perform analytical reviews for accounts receivables, notes and revenues Gross profit percentage Accounts receivable turnover Number of days in receivables Sales comparisons per month Sales per square foot CPA Juan M. Garcia Merced

  13. Determine adequacy of allowance for uncollectible accounts CPA Juan M. Garcia Merced

  14. Ascertain whether any receivables have 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

  15. Investigate any transactions with or receivables 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

  16. Evaluate financial statement presentation and disclosure of receivables and revenue CPA Juan M. Garcia Merced

  17. Questions? CPA Juan M. Garcia Merced

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