Similar to other asset items, the existence is usually the major auditing issue for us when we perform the audit of accounts receivable.

Audit Procedures for Accounts Receivable ExistenceД®xistence assertion tests whether the accounts receivable on the balance sheet actually exist. Right and obligation The client has the right of controls on the accounts receivable included in the financial statements. Completeness All accounts receivable transactions that should have been recorded have been recorded. Valuation The amount of receivables recorded in the clientвЂ™s account is mathematically correct and their balances reflect the actual economic value. In the audit of accounts receivable, we usually test the audit assertions included in the table below: Audit assertions for accounts receivable Existence The accounts receivable that are shown on the balance sheet at the reporting date really exist. Also, accounts receivable are usually tested together with the sale revenue transactions in the clientвЂ™s account. In this case, the accounts receivable balance here should not exist in the first place as the customers will return the goods after the year-end.ДЄs auditors, we usually perform audit procedures on accounts receivable by testing the audit assertions such as existence, valuation, completeness, and right and obligation.

This is due to the clientвЂ™s accounts receivable usually expose to the risk that is related to the intentional manipulation of sales in order to reach the target sales or an actual fraud to steal the products.ДЄn example of accounts receivable manipulation would be the clientвЂ™s personnel may persuade or collude with the customers to buy the products on credit and promise to have them return products to the company after year-end to increase sales at year-end in order to achieve the target sales. In the audit of accounts receivable, the inherent risk of accounts receivable involves more on the existence of their balances. Accounts receivable are usually material items on the balance sheet hence to audit accounts receivable, it is very important to perform proper audit procedures in order to obtain sufficient audit evidence for making appropriate conclusion on receivables.

Accounts receivable turnover