Obtain Aged Schedule of Accounts Receivable The auditor should obtain an aged schedule of accounts receivable as of the confirmation date.
The steps in the process of confirming receivables follow: Obtain Aged Schedule of Accounts Receivable The auditor should obtain an aged schedule of accounts receivable as of the confirmation date. He or she should apply the following procedures to this schedule: Determine that totals are correct.
Compare all or a selected sample of account balances with the account balances in the accounts receivable subsidiary ledger.
Select Accounts for Confirmation Auditors have used, and some continue to use, judgment in selecting accounts for confirmation. Statistical sampling methods, however, are ideal for the selection process.
Whatever method of selection is used, the auditor generally considers the following accounts: All accounts with a balance over a predetermined amount. Some or all accounts with zero balances.
Accounts with old unpaid items, especially when subsequent sales have been paid. Accounts written off during the year under review. Accounts with entities related to the client but not audited by the auditor.
Accounts with credit balances: Occasionally, the client will not want confirmation requests sent to these accounts. If the amounts are material, it might result in a scope limitation; however, this is generally not the case.
If accounts with credit balances are not confirmed, alternative auditing procedures should be applied. Of the remaining accounts, a representative portion both in dollar amount and number of accounts should be selected.
Prepare and Mail Confirmation Requests The auditor should observe the following procedures in preparing and mailing confirmation requests: Prepare schedule of accounts to be confirmed. Assign each account a number. This number also should be placed on the confirmation request.
Total the dollar amount of receivables selected for confirmation and compute as a percentage of the total dollar amount of the receivables. Determine the number of confirmation requests and compute as a percentage of the total number of accounts.
Leave a blank column for insertion of the date the second request was mailed. Indicate at bottom the date the first requests were mailed. Request that client address confirmation forms and prepare customer statements.
If auditor desires that client not know which accounts are to be confirmed, he or she should have his or her staff address confirmations. If auditor desires that client not know which accounts are to be confirmed but wants client to address confirmations, he or she should request client to address confirmation to all accounts and then eliminate the accounts not selected for confirmation.
When the auditor receives the addressed confirmation with the account balance and the customer statement, he or she should compare that balance with the balance on the schedule.
Independently, some customer addresses should be checked. These tests can be made by comparing the address on confirmation with the address in the telephone book.
When the requests have been stamped, the auditor should mail them. From the time the auditor receives the addressed confirmation requests containing the account balances, he or she should never lose control.
Process Responses to Confirmation Requests When confirmation replies are received, the auditor should do the following: Enter for each account the following: If the amount confirmed differs from the account balance, the following should be done:Steps In Confirmation Process The steps in the process of confirming receivables follow: Step-1 - Confirmation Procedure of Account Receivable Essay introduction.
Obtain Aged Schedule of Accounts Receivable The auditor should obtain an aged schedule of . Steps In Confirmation Process The steps in the process of confirming receivables follow: Step Obtain Aged Schedule of Accounts Receivable The auditor should obtain an aged schedule of accounts receivable as of the confirmation date.
Automate your audit confirmation process Audit Applications is a secure online system simplifying and improving the accounts receivable confirmation process and accounts payable confirmation process for auditors and accounting firms. For confirmation requests that are not returned by customers, auditors must perform alternative procedures to verify the accounts receivable balance.
To do so, the auditor will request proof that the customer balances selected for confirmation have been paid since the company's fiscal year end. The accounts receivable confirmation March 01, / Steven Bragg When an auditor is examining the accounting records of a client company, a primary technique for verifying the existence of accounts receivable is to confirm them with the company's customers.
Confirmation of accounts receivable, including a financial institution’s loans, is a generally accepted auditing procedure. It is therefore presumed that the auditor will request the confirmation of accounts receivable during an audit. In general, auditor uses confirmation process to obtain sufficient competent evidential matter.