Debtors - Audit Process
Considering that what we have gone by on the other assets the audit work to check the figure of trade debtors should be follows as:
1) Get a schedule of debtors, preferably aged.
2) Validate the controlled records over sales and debtors by a selected sample of substantive testing and compliance testing.
3) Control account's detailed examination involving review of the reconciliation among the debtor's ledger and the control account.
4) Circularisation of debtors' sample strictly to confirm subsistence.
5) Carrying out cut off test to ensure about sales and stocks have been accounted for in the accurate time.
6) Analytical review through comparing sales or else debtors ratio along with previous years.
7) Looking for evidence to confirm such balances attributed to individual debtors are composed of exact items.
8) Evidence such all involved items are bona fide trade debtors.
9) Review of credit notes mattered than date to ensure about they do not cancel debtors balances.
10) Debtors examination for collectability.
11) Ensuring about each account is settled from time to time and enquiring also into credit balances.
12) On the schedule such is attained, the auditor tests balances on ledger accounts to the schedule and vice versa, he tests also the cast of the schedules and ensures about the totals agree to the balance of the control accounts.
13) The auditor tests the effectiveness of the system of internal control hence before he does that he has to determine that what the system is and a good system for debtors should ensure about:
- Only bona fide sales bring debtors in to be;
- All that sales are to approve customers;
- All that sales are appropriately recorded;
- Once they have been recorded the dates are merely eliminated through receipt of cash or on the authority of a liable official;
- Debts are composed punctually;
- Balances are habitually aged and reviewed. A specific system for follow up exists and whether essential adequate provision for doubtful and bad debts is made.
According to debtors the crucial concerns for the auditor are the existence of debtors and the valuation of debtors.