Chapter 9: SP - Trade Receivables

Question 1

Existence + Rights and Obligations (2)

Answer 1

1. Select sample of debtors from Sales Ledger.
   Perform circularization.
   no response>alternative
   exceptions identified>additional
2. Review the control account entries shortly before and after the year end for unusual items and investigate them.
   If large credit notes issued after year>debtors are overstated

Question 2

Completeness (2)

Answer 2

1. Agree list of debtors from Sales Ledger with Control Account and financial statements
2. Select sample of sales invoices and trace into debtors’ account (kinda floor to list)

Question 3

Classification/Presentation (2)

Answer 3

1.** Scan ledger** for identifying current/non current
2. Ensure correctly presented as per appicable FRF
3. Inquire about related party receivables and it’s disclosures in F/S

Question 4

Cut-off

Answer 4

Checking that sales invoices and credit notes dated shortly before and after the year end are recorded in the correct financial year.

Check Credit note & Goods Delivery Note at Y.end

Question 5

Valuation and Allocation (Procedures to ensure appropriate Provision for bad debts) (5)

Answer 5

1. Review adequacy for provisions/assumptions for calculation of P4DD.
2. Obtain aging report and test its accuracy. (Compare aging with period and identify oldest debtors)
3. Disputed receivables reasonablity? check minutes for expected recovery
4. Historical accuracy: how many % of debtors go bad in past > accuracy of provision
5. Examine cash recovery after YEAR END for writen off debts after year