Question

How to test for the accuracy of the accounts receivable, inventory, accounts payble, and cash accounts?

Answer 1

Test for the accuracy of accounts receivable 1. To confirm the balances of the accounts receivables as shown in the financial statements by sending balance confirmations documentsto the debtors. 2. Keep a check on the ledgers to check for the transactions and look into if any suspicious transactions. 3.Check the transactions treat ed as bad debts and look into the reason for the same and check whether they are genuine transactions. 4.Where there are large number of transactions pick a sample of invoices and then check for the accuracy 5. Keep a check on cash receipts received on account of sales. Test for the accuracy of Inventor 1.Perform a physical check of the inventory and confirm whether they are matching with the balance shown in the financial st atements. 2.Check the inventory having high value and check whether they are valued accurately 3.Check whether the inventory are valued at lower of cost or net realisable value 4.Check whether the treatment of scrap are being properly made 5.Check the completion percentage of work in progress and check whether they are properly valued Test for the accuracy of Accounts payable 1.Check the cash disbursements made in respect of accounts payable 2.Confirm the balances with the creditors and match them with the balance shown in the financial st atements. 3.Check whether the invoices provided by the creditors are proper and mat ch the payments with the bills provided by them 4.Check the payment terms mentioned in the bills and whet her they company is making payment as per the terms mentioned 5.Check the transactions where advance payment has been made but services or goods are not yet provided Test for the accuracy of Cash accounts 1.Check whether the voucher has been properly made or kept in respect of cash receipts and disbursement 2.Check whether the authorized personnel are in place for cash receipts and disbursements 3.Check the petty cash balance and expenses against such cash 4.Check whether the expenses and receipts are recorded in the correct ledger and correct treatment is given in respect of that 5.Check the cash receipts and expenses balance at the end of the day and reconcile them with the cash deposited in the bank the next day