a) Audit tests I would carry out to verify trade accounts receivable at the year end
i) Cut off tests
I would perform this test to ascertain that the transaction of the trade receivable relates to the
period in which the balances are recorded
ii) Walk through audit test
I would perform this test to check that there were no factious recorded in the books of account
that would result to incorrect balances at the year end.
iii) Compliance test
I would perform this test to ascertain that the control system instituted by the management on
transactions operated in effective manner and thus obtaining correct balances at the year end
b) Audit work I would carry out on the following replies to receivables circularization.
i) Balance agreed by the customer.
- 1 would consider for the adequacy of any provision made for a long outstanding debt
- 1 would ensure that the debt does not appear to be uncollectable
- 1 would review the cash received after- date.
- 1 would perform walk through audit test to determine for the validity of the transaction.
ii) Balance not agreed by the customers
- 1 would inquire why such balances are not agreeing
- 1 would follow up their effect on total receivables evaluated
- I would perform substantive work to determine whether material adjustment are required
- I would inquire with the management if the cash is in transit or if it has been reflected in
the bank but not yet debited in the books.
iii) Customers do not reply the confirmation letter.
- I would review after-date cash receipts by inspecting bank statements and cash receipts
documentation.
- I would examine the customer's account and customer correspondence to assess whether
the balance outstanding represents specific invoices and confirm their validity.
- 1 would examine the underlying documentation (purchase order, dispatch
documentation, duplicate sales invoice etc).
- 1 would inquire from management explanations for invoices remaining unpaid after
subsequent ones have been paid.
- I would observe whether the balance on the account is growing and if so, find out why
by discussing with management.
- Perform alternative procedures
Kavungya answered the question on May 14, 2019 at 13:36
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