How can analytical procedures assist in the audit of account receivables?
For example, when obtaining audit evidence regarding the valuation assertion for accounts receivable balances, the auditor may apply analytical procedures to an aging of customers’ accounts, in addition to performing tests of details on subsequent cash receipts, to determine the collectability of the receivables.
Why does an auditor perform analytical procedures on receivables?
Applying audit procedures on Accounts receivables: Audit procedures are applied to the accounts receivables balances to test their assertions. Testing these assertions includes verifying their existence, rights, and obligations, completeness, accuracy, classification, and presentation.
What is the audit of accounts receivable?
The objectives of an AR audit During an audit, the auditor will try to determine whether: Your balance sheet reflects your accounts receivable accurately. Refund records for returned items are accurate. Proper measures are taken to prevent misappropriation of non-electronic payments in the form of cash and checks.
What are the five major types of analytical procedures in auditing?
Typically, five types of audit procedures normally use by auditors to obtain audit evidence. Those five audit procedures include Analytical review, inquiry, observation, inspection, and recalculation.
What are some examples of analytical procedures?
Examples of analytical procedures are as follows:
- Compare the days sales outstanding metric to the amount for prior years.
- Review the current ratio over several reporting periods.
- Compare the ending balances in the compensation expense account for several years.
- Examine a trend line of bad debt expenses.
What are examples of substantive analytical procedures?
Examples of substantive procedures are:
- Bank confirmation.
- Accounts receivable confirmation.
- Inquire of management regarding the collectibility of customer accounts.
- Match customer orders to invoices billed.
- Match collected funds to invoices billed.
- Observe a physical inventory count.
- Confirm inventories not on-site.
What are the objectives of account receivables audit?
The main objective of an accounts receivable audit is to determine whether there are adequate controls and procedures to ensure the proper recording of accounts receivable. The overall objective of the accounts receivable audit is to ensure they are presented fairly in the financial statements.
What are the different types of audit procedures?
Here are several general classifications of audit procedures:
- Classification testing.
- Completeness testing.
- Cutoff testing.
- Occurrence testing.
- Existence testing.
- Rights and obligations testing.
- Valuation testing.
What are the different types of analytical procedures?
Three types of analytical procedures commonly used by auditors are trend analysis, ratio analysis and reasonableness testing. a significant difference or threshold The auditor needs to determine a threshold that can be accepted without further investigation.
What is meant by analytical procedures?
Analytical procedures are a type of evidence used during an audit. Analytical procedures involve comparisons of different sets of financial and operational information, to see if historical relationships are continuing forward into the period under review.
What is the purpose of analytical procedures?
Analytical procedures are used for the following purposes: To assist the auditor in planning the nature, timing, and extent of other auditing procedures. As a substantive test to obtain evidential matter about particular assertions related to account balances or classes of transactions.
What is the difference between analytical procedures and substantive procedures?
Substantive tests, aka tests of balances, are more statistical driven and really dig into the details of the balances themselves. Analytical Procedures ARE $ubstantive Procedures. Notice the S in substantive. There are two main types of activities auditors perform–tests of internal controls and $ubstantive testing.
