RECEIVABLES

RECEIVABLESRECEIVABLES

Chapter 11

Juan M. Garcia Merced

Cont 4017

CPA Juan M. Garcia Merced

Sources and Nature of Sources and Nature of ReceivablesReceivables

Includes claims against customers, loan to officers, loans to subsidiaries, tax refunds, advances to suppliers, notes, and insurance claims.


Auditor’s Objectives - Auditor’s Objectives - ReceivablesReceivables

Substantiate the existence of receivables and the occurrence of revenue transactions

Establish the completeness of receivables and revenue transactions

Verify the cutoff of revenue transactionsDetermine that the client has rights to

recorded receivablesEstablish the proper valuation of receivables

and the accuracy of revenue transactionsDetermine that the presentation and disclosure

of receivables and revenue are appropriate


Audit Time for ReceivablesAudit 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.


Audit Program Audit Program – Substantive – Substantive Procedures for Procedures for ReceivablesReceivables


Obtain an aged trial balance of Obtain an aged trial balance of receivables and trace or reconcile receivables and trace or reconcile to the general ledgerto the general ledger


Obtain analyses of notes Obtain analyses of notes receivable and related interestreceivable and related interest

Note receivable

Amount Interest Due date Collateral

Yale, Inc. $10,000 8% 12-31-2003 None

Mr. White $ 3,500 12% 06-30-2004 None

$13,500


Confirm receivables with debtors Confirm receivables with debtors – Positive or Negative – Positive or Negative ConfirmationsConfirmations


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 $ d as of [Date]d is correct with the following exceptions (if any)

_____________________________________________________________________________________________________

_________________________________________________________________e

Signature _______________________Title _ eDate _______ e

Positive Positive ConfirmationsConfirmations


Negative ConfirmationNegative ConfirmationOur auditors, [Name], are conducting an audit of our financial statements. Our records show an amount of

$ d due 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 $ d at [Date]d does not agree with our records because (no reply is necessary if your records agree).

______________________ e

Signature

Title _______________________e Date ____________________e


Review the year end cut-off of Sales Review the year end cut-off of Sales TransactionsTransactions


Perform analytical reviews for Perform analytical reviews for accounts receivables, notes and accounts receivables, notes and revenuesrevenues

Gross profit percentage

Accounts receivable turnover

Number of days in receivables

Sales comparisons per month

Sales per square foot


Determine adequacy of Determine adequacy of allowance for uncollectible allowance for uncollectible accountsaccounts


Ascertain whether any receivables Ascertain whether any receivables have been pledgedhave been pledged

Review bank confirmations

Review legal letters

Review letters or confirmations from creditors

Read contracts

Read board of direct. minutes


Investigate any transactions with or Investigate any transactions with or receivables from related partiesreceivables from related parties

From directors, employees, affiliated companies, and determine whether the transaction were:

Properly authorized and recorded.

Adequately disclosed in the financial statements


Evaluate financial statement Evaluate financial statement presentation and disclosure of presentation and disclosure of receivables and revenuereceivables and revenue


Questions?Questions?

RECEIVABLES

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