Audit Program for Receivables

Objectives:

To determine that:

1. Receivables represent valid claims against customers and other parties and have been properly
recorded.

2. The related allowance for doubtful accounts, returns and allowances, and discounts are
reasonably adequate.

3. Receivables are properly described.

4. Disclosures with respect to the accounts are adequate.

Procedures:

1. Obtain a list of aged accounts receivable balances from the subsidiary ledger.

2. Test accuracy of balances appearing in the subsidiary ledger.

3. Confirm accuracy of individual balances by direct communication with customers.

4. Review correspondence with customers for possible adjustments.

5. Test propriety of cut-off.

6. Perform analytical procedures.

7. Review individual balances and age of accounts with appropriate officer.

8. Obtain analyses of significant other receivables.

9. Ascertain whether some receivables are pledge, factored, discounted, or assigned.

10.Determine propriety of financial statement presentation and adequacy of disclosures.

11.Obtain receivable representation from client.

Audit Objectives

1. To determine that receivables exist as of the balance sheet date.

2. To verify the existence of the accounts receivables.

3. To determine whether balance of accounts of the debtors are accurate.

4. To determine whether all transactions relative to receivables are recorded in the proper
accounting period.

Assertions Affected
1. Existence
2. Valuation
3. Completeness
Audit Procedures
1. Obtain a schedule or list of customers with their corresponding balances.
2. Check and recalculate total balance of Subsidiary Ledger and compare to General Ledger.
3. Reconcile with amount in Trial balance.
4. Determine discrepancies noted during investigation and make the necessary proposed adjustments.
5. Interview management of any discrepancy in amounts.

Findings
The Accounts Receivable Subsidiary Ledger, Sales Book Journal, Cash Receipts Journal, Sales Invoices and
Official Receipts were checked and cross-referenced with each other. The audit team noted the
following discrepancies:

1. Account No. 112- Gwendo Reyes has an unadjusted negative balance of P 50, 000
2.OnAccount No. 111 – Anna Reyes (employee), SI 1251 (P 246, 825) and OR No. 106 (P246, 825)
were erroneously recorded to this account. The following transactions were already recorded on
Account No. 103 – Eagle Contractors. These should be eliminated from Anna Reyes’ subsidiary
ledger account to obtain the correct ending balance.
3. SI 1259 (P 75, 805) and SI 1260 (P 111, 395), with a total amount of P 187, 200 are cash sales
and thus, should not be reflected on Building Block’s account. The corresponding OR No. 114 (P 187,
200) is the cash payment of SI 1259 and SI 1260.
4. SI 1257 (P 86, 850) and OR No. 117 (P 86, 850) was both erroneously recorded on Account No.
127 – Luli Samson in the amount of P 868, 500 each.
5. SI 1253 (P 58, 035) and OR No. 110 (P 58, 035) was not recorded on Sampollo Company’s account
and was instead erroneously recorded on J.R. Alano Trading’s Account (No. 128) in the amount of P 580,
350, both for SI 1253 and OR No. 110.
6. OR No. 118 (P 484, 000) was not reflected on Account No. 102 – Louie Tan.
7. OR No. 121 (P 93,750) was not reflected on Account No. 113 – Benitez Merchandising.
8. OR No. 122 (P 204, 475) was not reflected on Account No. 121 – Susan de Leon.
9. SI 1266 (P 232, 000) from Benitez Merchandising (credit sale) was not recorded on the
Sales Journal.
The entry for this sale is recorded in procedure E7, PAJE 5 with its corresponding output tax.
10. There has been a discrepancy when in the recomputation of the Accounts Receivable
Subsidiary Ledger in comparison to the amount shown on Accounts Receivable General Journal.
The Accounts Receivable beginning balance was P 15, 316, 000 on the Accounts Receivable
General Journal and P 15, 800, 000 on the recomputed amount of Accounts Receivable –
Beginning Balance.

a Account no. 112, Gwendo Reyes (Receivable) has a negative balance hence, adjustment is
proposed to eliminate the negative amount.
M To reclassify Account No. 111 – Anna Reyes (employee) to Receivable from Employees.

At the subsidiary ledger showed some discrepancies. The team had reconciled the discrepancies
in the Receivables.