Assume you are working on a 12/31 year-end audit. It is now March 31st and the...
Assume you are working on a 12/31 year-end audit. It is now March 31st and the 12/31 accounts receivable aging shows a large receivable that was outstanding on 12/31 for 120 days. Further, the client's receivables are typically collected in less than 45. You anticipate that the client's allowance for doubtful account should be increased and inform the client about your disposition. The client disagrees. Is there an alternative substantive procedure that you could perform that would provide convincing evidence that this balance is collectible? If so, explain.
Homework Answers
Debtors are outstanding for more than 120 days as on 31 December. This means that debtors are outstanding for more than 150 days as on 31st March whereas average collection period is 45 days.
Thus ideally provision for doubtful debts should be increased. But if client is disagreeing the fact then following alternative substantive procedure can be performed.
Auditor can take independent confirmation from Debtors regarding balance confirmation as on 31st December and if the confirmation from debtors matches with the client's books then this can be an assurance to the auditor that the amount due from debtors shall be collected and it shall not become bad.
Moreover, auditor can understand the reason for delay in collecting the remittances and document the same and if the reasons so given by the client are justifiable and it seems to the auditor that the amount shall be collected, then auditor can agree with the client for not making provisions.
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Assume you are working on a 12/31 year-end audit. It is now
March 31st and the...
Kindly, provide short answers. Thank you. Class Discussion Exercise- Accounts Receivable Audit Objectives and Procedures for...
Kindly, provide short answers.
Thank you.
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Kindly, provide short answers.
Thank you.
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