Internal Audit Checklist For Accounts Receivable

Financial auditing procedures allow your business to examine its records objectively and independently. By doing this, they provide an opportunity to discover any weaknesses within internal controls as well as build confidence in projected business projections.

An audit of accounts receivable typically involves verifying receivable balances by seeking confirmation from customers and reviewing sales and shipping documents, in addition to assessing receivable quality through analysis of aging reports.

Review of Credit Memos
At this phase of an audit, an auditor will search for records of credit memos. They may even contact your customers directly in order to authenticate this information with them directly.

Accounts receivable is the amount owed to you from customers for goods and services purchased on credit, listed as an asset on your balance sheet until it can be converted to cash (usually within 12 months).

Your best bet for combatting fraud is to delegate duties in such a way that no single individual is privy to both customer payments and creating credit memos – password-protected billing software is one way of doing this, while another measure would be having your manager review all credit memos prior to being issued as this offers extra protection against any untoward activities.

Review of Bill and Hold Sales
Bill-and-Hold arrangements record revenue or payment for goods before they have been shipped by their seller, in contrast with generally accepted accounting principles which require revenue recognition upon delivery of the items. Such an arrangement can be risky and has lead to instances of financial fraud within corporations.

Auditor review select invoices to ensure they were sent out as promised and to check that their amounts are correct. They compare invoice dates with shipping log dates to identify any discrepancies that might exist between these.

Auditors also conduct an impairment analysis on selected accounts receivable in order to ascertain whether they are impaired, which includes identifying indicators for impairment, calculating recoverable amounts and calculating impairment losses.

Review of Invoices
invoices are key components of an accounts receivable system, whether used for customer payment or internal reporting purposes. Auditors should review details such as customer name, amount billed, tax amounts and invoice dates on all invoices received for auditing purposes.

Comparing invoice totals with receiving reports, as well as reviewing procedures to ensure accounting departments match and distribute invoice items correctly, are also part of ensuring successful operations.

Additionally, they will review procedures for sending confirmations and requesting documentation in support of billing. Furthermore, they may review aging reports to evaluate receivable quality as well as assess likelihood of bad debt recovery. Finally, they may examine a trend line of sales and receivables to detect any unusual trends as well as comparing sales/receivables against current assets to identify any impairment issues.

Review of Sales and Shipping Documents
Review of sales invoices and shipping documents ensures that sales transactions are properly recorded, shipped goods are accurately reflected in receivable accounts, and an aging analysis is effective.

Additionally, auditors closely scrutinize receiving logs for unusually large customer returns near the end of an audit period; this suggests that more products were shipped than were authorized.

Auditor’s Analysis The auditor compares invoice totals in an accounts receivable aging report against those found on purchase orders and receivable confirmations to ensure they match. If they don’t, an investigation must be undertaken as to why. This file is only accessible by premium subscribers or site license users.

Review of Credit Notes
Accounts receivable is an asset on any company’s balance sheet that represents cash owed from customers for goods or services purchased on credit. By conducting audit procedures on accounts receivable records, companies can ensure they are accurate and complete.

An audit involves verifying invoices from an accounts receivable aging report against supporting documentation in order to ensure they match with correct amounts billed, and identify any discrepancies between them and what’s actually charged for. An auditor may also identify reconciling items.

Auditors also engage in numerous other accounting-related tasks, such as assessing the recoverability of accounts receivable and impairment disclosures, as well as adhering to accounting standards. By managing all these activities via one platform – such as document distribution – auditors provide greater auditability which helps businesses enhance operations and cash flow.