Following are the procedures for auditing receivables.
- Send confirmation of the receivable balance to the customers. Receiving confirmation from the customers about the balance helps ensure its completeness and existence.
- Perform subsequent testing for the receivable balance. The subsequent testing means reviewing if payment was received against receivables recorded in the business financial statement.
- Vouch for the sales invoice in terms of authorization, approval, and dispatch. This helps ensure the accuracy of the receivable balance recorded in the business financial statement.
It’s important to note that priority is given to the sending confirmation because it’s validated by an independent source, which is considered a primary source of evidence. The second priority is the subsequent testing because it helps ensure the specific balance is realized. As a place of last resort, vouching can be done to ensure an invoice was raised for the services provided or product delivered.
It’s further important to note that the same audit procedures are applicable to the accounts payable balance.
Wrap up
Broadly, there are three different ways to audit receivable balances. These ways include confirmation, subsequent testing, and vouching. The same procedures can be performed for the payable balance as well.
Confirmation from customers is considered valuable audit evidence as generated by an independent source. Subsequent testing signals equal validation as the balance is realized at the end of the accounting period. The least assurance is obtained when vouching for the invoices.
Daniyal Khatri, ACCA, is a seasoned bookkeeping specialist with over a decade of experience in designing precise, compliant financial systems. His expertise spans daily transaction tracking, ledger management, and financial record accuracy, ensuring businesses maintain organized, audit-ready books. Daniyal excels at aligning processes with evolving compliance standards, integrating user-friendly tools to automate workflows, and translating regulatory complexities into actionable steps. By combining technical proficiency with a focus on clarity, he empowers organizations to achieve error-free bookkeeping, minimize risk, and build a foundation for informed financial decisions.
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