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Accounting Controls and Procedures: Verification and Reconciliation of Accounts Receivable, Study notes of Auditing

Various controls and procedures related to the verification and reconciliation of accounts receivable (a/r) in an organization. Topics covered include confirmation of sales, documentation, observation of sales processes, analytical procedures, and tests of controls. The document also emphasizes the importance of ensuring accuracy, completeness, and correct classification of a/r, as well as adhering to gaap requirements.

Typology: Study notes

2011/2012

Uploaded on 03/09/2012

mejiaritch
mejiaritch 🇺🇸

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bg1
P409
physical examination
confirmation
documentation
observation
inquires of the client
reperformances
analytical procedures
recalculation
P451
1 All correspondence is sent to the president
2 All sales order number are accounted for weekly by controller
3 All bills of lading number are accounted for weekly by controller
4 Sales amount recorded on sales invoice is based on standrad
price list. The price list is stored in inventory master file and can
be changed only with authorization of the VP os sales
5 Pam compare sale invoices to shipping documents for
descriptions and quantities and the sale invoices is reviewd for
reasonablenss of the extensions and footing. She initials a
copy of the invoice before the original is mailed to customers
6 Sales are batched daily by Pham. The batch totals are compared
with the sales journal weekly.
7 Statements are sent to customers monthly
8 Accounts receivable master file total is compared with general
ledger by the controller on a monthly basis.
9 Upaid invoices are filed separately from paid invoices
10 Receptionst stamps incoming checks with a restrictive endorsement
11 Deposits are made daily(no cash sales)
12 The bank account is reconciled by the controller
13 All bad debt expenses and write off bad debts are approved by
president and initiated by the controller.
14 Financial statemtns are printed montly by the controller and reviewd
by the president.
15 All errors are reviewed daily by the controller immediatley after
the updating run. Collections are made the same day
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physical examination confirmation documentation observation inquires of the client reperformances analytical procedures recalculation P 1 All correspondence is sent to the president 2 All sales order number are accounted for weekly by controller 3 All bills of lading number are accounted for weekly by controller 4 Sales amount recorded on sales invoice is based on standrad price list. The price list is stored in inventory master file and can be changed only with authorization of the VP os sales 5 Pam compare sale invoices to shipping documents for descriptions and quantities and the sale invoices is reviewd for reasonablenss of the extensions and footing. She initials a copy of the invoice before the original is mailed to customers 6 Sales are batched daily by Pham. The batch totals are compared with the sales journal weekly. 7 Statements are sent to customers monthly 8 Accounts receivable master file total is compared with general ledger by the controller on a monthly basis. 9 Upaid invoices are filed separately from paid invoices 10 Receptionst stamps incoming checks with a restrictive endorsement 11 Deposits are made daily(no cash sales) 12 The bank account is reconciled by the controller 13 All bad debt expenses and write off bad debts are approved by president and initiated by the controller. 14 Financial statemtns are printed montly by the controller and reviewd by the president. 15 All errors are reviewed daily by the controller immediatley after the updating run. Collections are made the same day

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1 A/R in T/B agreed with master file amounts, total = G/L (Tie in) 2 A/R (Existences) 3 Existing a/cs are included (Completeness) 4 A/R are accurate (Accuracy) 5 A/R are correctly classified (Classification) 6 Cutoff for A/R is correct (Cutoff) 7 A/R is stated at realizable values (Relabizable value) 8 The clinet has rights to A/R (rights) 9 A/R Presentation and Disclosures

Aged T/B Confirmations zero balance confirmation/ Analytical Procedures/TOT on shipped not recorded confirmation / examine source docuemnts review aged T/B for affiliates, officers, directors, related parties cutoff for sales, sales return, cash receipts= test cutoff page 536 GAAP requires A/R = amount will be collected examine pledging of A/R undersatnd the GAAP presentation/disclosure requirements

Substantive Tests of transactions x x x x Substantive Tests of transactions Objectives

  1. Occurences
  2. Completeness
  3. Accuracy
  4. Posting and Summarization
  5. Classification
  6. Timing TOT) reperform: trace S/O number (Trace S/O to B/L TOT) reperform: trace B/L number (trace B/L to S/O) TOT) reperform: match standard price list/ documentation: verify controller approval of price change. TOT): reperform: match s/o to shipping and to invoice for quanity shipped. Recalculate QTY X Price? TOT) Recaluate batch totals and reperform matching of totals to sales journal TOT) trace statement balance to A/R master file TOT) trace statement balance to A/R master file TOT) Verify stamp restriciton at back of checks TOT) Compare deposit slip with check prelisting TOT) audtior perform bank reconciliation TOT) verify approval of bad debt write off approved by president and initiated by controller TOT) verify president review of monthly statements TOT) verify error correction initiated by controller and test why error occur (fraud)?