How to test the completeness of the accounts receivable balance?
The primary test that can be performed is to obtain the aged trial balance of receivables and trace the total balance to the general ledger. This provides the auditor comfort that all outstanding receivables are included in the financial statements.
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Is the audit team required to send accounts receivable confirmations?
Yes, for most firms, the audit team is required send confirmations to customers to confirm their outstanding balance at year-end. If the audit team determines that sending confirmations is a waste of time, they can perform alternative procedures, but that typically results in extensive documentation. The primary reason is to test the existence & occurrence […]
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Can confirmations test the rights & obligation assertion for accounts receivable?
Yes, both bank confirmations and debt confirmations can be used to understand if there are any liens on receivables. The audit team should also review board meeting minutes to understand if the company has entered into any agreements to factor or pledge their receivables to a 3rd party.