RECEIVABLES

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.

3
Auditors Objectives - Receivables

• Substantiate the existence of receivables and the
  occurrence of revenue transactions
• Establish the completeness of receivables and
  revenue transactions
• Verify the cutoff of revenue transactions
• Determine that the client has rights to 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

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.

5
Audit Program Substantive Procedures for
Receivables
6
Obtain an aged trial balance of receivables and
trace or reconcile to the general ledger
7
Obtain analyses of notes receivable 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
8
Confirm receivables with debtors Positive or
Negative Confirmations
9
Positive Confirmations
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 Firms Name and Address in the enclosed
return envelope. PLEASE DO NOT MAIL PAYMENTS ON
THIS BALANCE TO OUR AUDITORS. Very truly
yours, Officers Signature and
Title ___________________________________________
_____________________________________________ Cli
ents Name To Audit Firms Named The balance
due Clients Named of d as of Dated is
correct with the following exceptions (if
any) ___________________________________________
__________________________________________________
________ ________________________________________
_________________________e Signature
_______________________Title _ eDate _______ e
10
Negative Confirmation
Our 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
Firms 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, Officers
Signature and Title _____________________________
_________________________________________________
Company Name Differences Noted (If Any) The
balance due Clients Named of d at Dated
does not agree with our records because (no reply
is necessary if your records agree). ____________
__________ e Signature Title ___________________
____e Date
____________________e
11
Review the year end cut-off of Sales Transactions
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
13
Determine adequacy of allowance for uncollectible
accounts
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
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
16
Evaluate financial statement presentation and
disclosure of receivables and revenue
17
Questions?