i) Trade Creditors
- Obtain a schedule of the trade creditors with appropriate age analysis and check this with the control account of the creditors ledger.
- Review the individual accounts with the largest through put of transactions during the period.
- Debit and credit balances should be separated; debit balances should be
- included in debtors (grossing up)
- Review the year-end cut-off procedures for purchases.
- Review the internal control over the purchases system which ensures that all goods received are properly recognized as liabilities of the entity.
- On testing individual balances that are suspicious, consider:
Is the balance made up of specific items outstanding within a reasonable period?
Have all the items been authorized for payment?
Can the amount be reconciled with creditors statement?
- Perform analytical procedures on creditors, comparing age analysis with previous periods and creditors days
ii) Specific provision for bad and doubtful debts
- For customers who are considered potential risks (hence provision made) review previous experiences with the particular debtor.
- To justify the specific provision, the debtor must exist, hence auditor should send debtors‘ circulirasion to the respective debtor(s).
- Carry out an age analysis for all debtors. Specific provision is made for longstanding debts.
- Review post balance sheet events to verify whether debtor paid hence need to cancel the provision earlier made.
- Check authority for making the provisions (specific)
- For debts considered risky, review the respective individual accounts of the customers and those that appear irregular by nature, composition or size of the balances or transactions therein.
Wilfykil answered the question on February 22, 2019 at 08:50
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