How to Audit Accounts Receivable

1. Trace receivable report to general ledger.
2. Calculate the receivable report total.
3. Investigate reconciling items.
4. Test invoices listed in receivable report.
5. Match invoices to shipping log.
6. Confirm accounts receivable.
7. Review cash receipts.
8. Assess the allowance for doubtful accounts.

What are the different types of substantive tests?

There are two categories of substantive tests – analytical procedures and tests of detail. Analytical Procedures consist of the comparison of data from different sources to determine if reported information looks ‘odd’ or ‘wrong’. Unexpected differences or variations in the data indicate a need for further review.

What are the common substantive audit tests for accounts receivable?

As indicated by the examples, substantive testing is likely to include confirmation of account balances with third parties (such as confirming receivables), recalculating calculations made by the client (such as valuing inventory), and observing transactions being performed (such as the physical inventory count).

What are substantive procedures examples?

Examples of substantive procedures are:

• Bank confirmation.
• Accounts receivable confirmation.
• Inquire of management regarding the collectibility of customer accounts.
• Match customer orders to invoices billed.
• Match collected funds to invoices billed.
• Observe a physical inventory count.
• Confirm inventories not on-site.

What is the difference between substantive analytical procedures and substantive tests of details?

As you can see, a test of details is just what it says it is. You are digging into the details of transactions. Substantive analytics, by contrast, look at numbers from a broader perspective. For example, the auditor might compute the current ratio or compare this year’s debt level with prior years.

What are the substantive procedures for accounts receivable?

Auditors perform substantive analytical procedures at the planning and review stages of an audit.

How are substantive audit procedures used in accounting?

Auditors use substantive audit procedures to test the balances of accounts receivable. Substantive audit procedures are direct tests using specific information from a company’s accounting system and financial statements.

How to test the existence of accounts receivable?

1 Existence. Existence assertion tests whether the accounts receivable on the balance sheet actually exist. 2 Valuation. Valuation assertion tests whether the accounts receivable recorded in the client’s accounts reflect their actual economic value. 3 Completeness. 4 Right and obligation. …

How are audit assertions included in accounts receivable?

In the audit of accounts receivable, we usually test the audit assertions included in the table below: The accounts receivable that are shown on the balance sheet at the reporting date really exist. The amount of receivables recorded in the client’s account is mathematically correct and their balances reflect the actual economic value.