What are the common substantive audit tests accounts receivable?

What are the common substantive audit tests accounts receivable?

What is Substantive Testing?

• Issue a bank confirmation to test ending cash balances.
• Contact customers to confirm that accounts receivable balances are correct.
• Observe the period-end physical inventory count.
• Confirm the validity of inventory valuation calculations.

What are the audit procedures for accounts receivable?

How to Audit Accounts Receivable

• Trace receivable report to general ledger.
• Calculate the receivable report total.
• Investigate reconciling items.
• Test invoices listed in receivable report.
• Match invoices to shipping log.
• Confirm accounts receivable.
• Review cash receipts.
• Assess the allowance for doubtful accounts.

What are substantive audit procedures?

Substantive procedures in auditing are processes or methods that auditors use in order to find or prevent miscalculations in financial records. Substantive procedures often provide a record of some financial activity that alerts professionals that the activity is happening and documents it for further review.

Under what condition would substantive testing of accounts receivable before the balance sheet date be appropriate?

It is acceptable to confirm accounts receivable prior to the balance sheet date if the internal controls are adequate and can provide reasonable assurance that sales, cash receipts, and other credits are properly recorded between the date of the confirmation and the end of the accounting period.

What is a substantive test of detail?

Substantive testing or substantive procedure is the technique used by the auditor to obtain the audit evidence in order to support auditor opinion. Substantive testing is sometimes called detail testing where the main objective is to verify the balances, transactions, and disclosures of financial statements.

What is substantive testing in audit sampling?

Substantive testing is an auditing technique that checks for any errors or material misstatements in a company’s accounts, financial statements or supporting documents. This traditional auditing method also helps an auditor to form an overall opinion about the company’s financial statements.

What procedure you would perform to test the existence of receivables?

The most common audit procedure involving the accounts receivable balance is confirmation. To test that accounts receivable exist, the auditor will send letters to a sample of the client’s customers asking to verify the amount that is owed to the company being audited.

What are the types of substantive tests?

The three types of substantive tests are analytical procedures, a test of details of transactions, and tests of details of balances.

Which of the following are substantive tests?

What items do you need to consider in performing substantive audit tests prior to the balance sheet date?

Factors to be considered in determining the relative mix of tests of details and analytical procedures include (1) the nature of the transactions and balances in relation to the assertions involved, (2) the availability of historical data or other criteria for use in analytical procedures, and (3) the availability of …

What are substantive tests in internal audit?

SUBSTANTIVE TESTS are those activities performed by the auditor to detect material misstatement or fraud related to transactions or account balances. There are two categories of substantive tests – analytical procedures and tests of detail.

What are the audit procedures for receivables?

Audit procedures for receivables AUDIT PLAN: RECEIVABLES Completeness Agree the balance from the individual sales ledger accounts to the aged receivables’ listing and vice versa.  Match the total of the aged receivables’ listing to the sales ledgers control account.

Do Auditors look at journal entries in accounts receivable?

If you have journal entries in the accounts receivable account in the general ledger, the auditors will likely want to review the justification for the larger amounts. This means that these journal entries should be fully documented. Test invoices listed in receivable report.

What happens if auditors are unable to confirm accounts receivable?

If the auditors are unable to confirm accounts receivable, their backup auditing technique is to verify that customers have paid the invoices, for which they will want to review check copies and trace them through your bank account. Assess the allowance for doubtful accounts.

How do auditors test invoices?

Test invoices listed in receivable report. The auditors will select some invoices from the accounts receivable aging report and compare them to supporting documentation to see if they were billed in the correct amounts, to the correct customers, and on the correct dates. Match invoices to shipping log.