Account receivable
- Customer bankruptcy – Review correspondence provided by trustee to make sure that customer in fact did file for it and determine the realizable value of the AR
- Examine sales invoices and shipment documents relating to that customer during the year
- Conduct subsequent receipt testing to test valuation and existence
- For Existence, send AR confirmations- highest level of assurance for existence
- Assess provision provided by management for AFDA
- For valuation and collectability of AR-Look at the AR aging and check the outstanding AR
Account payable
Key risk areas: Completeness and Valuation
- Completeness – look at cheques issued after year end, agree cheques to invoice and determine the appropriate period
- Completeness – obtain a list of unpaid invoices as of year end and determine why they are not yet paid and still outstanding
- Valuation – Obtain the AP aging schedule and inquire why it is still unpaid and outstanding
