70. AUDIT OF ACCOUNTS RECEIVABLE CONTROL OF FINANCIAL STATEMENTS

Checking receivables is to study that:

▪ all recorded debts of debtors actually exist (prerequisite for existence);

▪ all debts of debtors that actually exist are reflected in accounting (prerequisite for completeness).

Checking that all debtors’ debts reflected in the accounting actually exist. The auditor must request from the accountant a list of debts as of the reporting date. At large and medium-sized enterprises, this list can take 100-200 pages. In this case, you should ask to prepare three lists:

▪ a list of groups as they are maintained in accounting (for example, 1) advances paid to suppliers, 2) debts of buyers of products, 3) debts of financially responsible persons for shortages, etc.), indicating the total amount of debt for each group;

▪ a list of the ten largest amounts of debt as of the reporting date;

▪ a list of the five largest amounts of debt out of all debts that have been “hanging” since the beginning of the year and have not been repaid during the year.

From each list, select at least one debt. Ask to provide you with acts of reconciliation with these debtors. Examine the reconciliation act, acts sent by fax can be taken into account, but their reliability is low.

For a debt from the third list (“long-term debts”), find out the reason for non-payment, study the terms of the contract, ask if a reserve for possible losses was created for this debt due to non-payment of the debt, how the decision was made to sell products under such conditions, whether claim work, ask for documents.

Checking that all debts of debtors that actually exist are reflected in the accounts, is closely related to income test results. If the audit does not reveal unaccounted income, then most likely there are no unaccounted receivables.

A separate rare case is the lack of monitoring of receivables written off earlier unrealistic to call. According to accounting rules, after writing off the debt, it is necessary to monitor the solvency of the debtor for five years, and if its financial condition improves, the debt must be restored to the balance sheet. In practice, recovery of solvency is extremely rare, and write-offs of receivables are usually insignificant.

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