NAME OF AGENCY

AUDIT PROGRAM
FOR THE PERIOD ________________

ACCOUNTS RECEIVABLE -TRADE

( Account Code 121 )

ALLOWANCE FOR DOUBTFUL ACCOUNTS

( Account Code 301 )

Account Description: The account Accounts Receivables – Trade is used to record

the amount due from customers/clients resulting from services rendered,
trading/business transactions or sales of merchandise or property which are
expected to be collected in the regular course of business or over a definite period.

Audit Objectives:

1. To determine whether receivables represent valid claims against debtors and other
parties.
2. To determine whether recorded receivables are owned by the entity as of balance
sheet date.
3. To determine whether all valid receivables are completely and properly recorded.
4. To determine whether the related allowance for doubtful accounts is reasonably
provided.
5. To determine whether all transactions complied with the existing rules and
regulations and policies of the agency.
6. To determine whether the presentation and disclosure of receivables is adequate
which includes the classification of receivables into appropriate categories,
reporting of receivables pledged as collateral and the related party receivables.

Assertions: Existence or Occurrence ( EO ), Rights and Obligation ( RO ),

Completeness ( C ), Valuation or Measurement ( VM ), Validity/Legality or
Regularity ( VR ), Presentation and Disclosure ( PD ).
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ASSERTION
AUDIT FRAME
TO
WP

FS
PROCEDURES Ref
BE
DONE REMARKS
BY DATE DATE
STARTED COMPLETED

1.1 Obtain aging schedule of accounts

receivable and

a. Check totals.
b. Check if the balance reconciles C
with the general ledger control EO
account.
c. Trace individual balances to the C
subsidiary ledger. EO
d. Test the accuracy of the aging of C
accounts EO
e. Check non-trade accounts C
erroneously included in EO
customer’s accounts.
f. Investigate and reclassify C
significant credit balances. EO
g. Verify whether the schedule C
contains the following basic EO
information: VR
RO
 Name of debtor VM
 Address
 Balance of account
 Age of account balance
 Credit terms agreed upon,
including limit of credit
 Referrals for legal action

1.2 Test accuracy of balances appearing in C

the subsidiary ledger. Check totals in EO
the subsidiary ledger. Trace samples
to underlying records.
1.3 Confirm accuracy of individual C
balances by direct communication EO
with debtors on a test basis. (See
confirmation procedures.)

a. Investigate exceptions reported by

the debtors and discuss with

concerned for proper disposition.
b. If the request does not produce a
reply from the customer, perform
extended procedures, such as: VR
 Review collections after EO
year-end; EO
 Check supporting documents; VR
 Discuss the account with VM
concerned official.
c Prepare a summary of C
confirmation results. EO
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ASSERTION
AUDIT FRAME
TO
WP

FS
PROCEDURES Ref
BE
DONE REMARKS
BY DATE DATE
STARTED COMPLETED

1.4 Review correspondence with debtors EO

for possible adjustments. VM

1.5 Request the legal office for the status VR

of accounts referred to them for
collections
1.6 Take note of deficiencies, if any.
Prepare and issue AOM.

2.1 Test propriety of cut-off: VM

a. Examine sales recorded several C

days before and after the balance EO
sheet date and ascertain whether VM
the sales was recorded in the
proper period.

b. Verify subsequent collection of EO

receivable. Investigate the nature VR
and origin of any unusually large
balances in the accounts.

2.2 Review entries in the general ledger C

on a test basis. EO
VR

For debits to the account:

a. Trace postings to the subsidiary

ledger, JEVs, supporting billing
statements, invoices or other
documents.
b. Regularity
c. Authorization and approval
d. Validity
e. Accuracy
f. Numerical sequence of bills and
invoices

For credits to the account :

a. Trace postings to the JEV, Report C

of Collections and Deposits EO
(RCD) and Cash Receipt Journal
(CRJ)/GJ.

2.3 Take note of deficiencies, if any. VR

Prepare and issue AOM.
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ASSERTION
AUDIT FRAME
TO
WP

FS
PROCEDURES Ref
BE
DONE REMARKS
BY DATE DATE
STARTED COMPLETED

3.1 Perform analytical procedures, like:

a. Accounts Receivable turnover. VM

Compute the turnover of
receivables and compare it with
that of the preceding year and
indicating averages. Obtain
explanation from agency for
unusually low turnover rate.

b. Ratio of accounts written off to VM

balance of accounts receivable.
Compare with prior year and
obtain management’s

3.2 Compare a sample of shipping C

documents to the related invoices for EO
orders which have been shipped but
not billed.
4.1 Examine the entry recording the VR
current year’s provisions and the VM
procedures used by the client in
computing the allowance for doubtful
accounts.
4.2 Where provisions are made by the use Va/LR
of formula based on the aged listing, VM
determine by reference to the details
of the agency’s procedures whether
the basis is:

a. consistent with prior years;

b. appropriate to the circumstances
of the business; and
c. in accordance with the accounting
policy.

4.3 Trace the account Bad debts expense

to the general ledger.

4.4 Check accuracy of agency’s C

computation of bad debts. VR
VM
4.5 Evaluate the reasonableness of the VR
basis of allowance for doubtful VM
accounts, loss experience of prior
year, data on subsequent collections,
opinion of credit manager and
collection lawyers, results of
circularization, and other pertinent
information.
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ASSERTION
AUDIT FRAME
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WP

FS
PROCEDURES Ref
BE
DONE REMARKS
BY DATE DATE
STARTED COMPLETED

4.6 Review individual balances and age C

of accounts and evaluate accounts EO
that should be written off. VM

4.7 Obtain and examine the list of debts C

written off during the year. EO
VM
4.8 Check totals and verify whether C
debts written off are no longer EO
included as part of receivable VM

4.9 Inquire if continuous follow up is C

made on debts written off and verify EO
whether there are collections VM
received and these are properly
accounted for.
4.10 Check whether the list of debts VR
written off is properly kept and
controlled.
4.11 Take note of deficiencies, if any.
Prepare and issue AOM.
5.1 Review the agency’s legal basis
like Circulars and / or Board
Resolutions on provision for doubtful
accounts and writing off bad debts:

a. Examine proper authorization of VR

provision for doubtful accounts; VM

b. Examine proper authorization for VR

all debts written off. VM

6.1 Review adequacy of disclosures made VR

on provision for doubtful accounts RO
and writing off bad debts with those PD
required by generally accepted
accounting principles. There
should

be disclosure on the pledging or

assigning of accounts receivable.
Evidence of such activities can also
be obtained from a review of the
minutes of board of director’s
meetings and inquiry from
management.
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ASSERTION
AUDIT FRAME
TO
WP

FS
PROCEDURES Ref
BE
DONE REMARKS
BY DATE DATE
STARTED COMPLETED

6.2 Check whether the account is PD

presented in the balance sheet as
current assets.

6.1 Take note of deficiencies, if any.

Prepare and issue AOM.

PREPARED BY : REVIEWED BY : APPROVED BY :

Date Date Date