What assertion is accounts receivable?
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What assertion is accounts receivable?
The primary relevant accounts receivable and revenue assertions are: Existence and occurrence. Completeness. Accuracy.
How do you test the completeness of accounts receivable?
The primary test that can be performed is to obtain the aged trial balance of receivables and trace the total balance to the general ledger. This provides the auditor comfort that all outstanding receivables are included in the financial statements.
What is the assertion of completeness?
The assertion of completeness also states that a company’s entire inventory (even inventory that may be temporarily in the possession of a third party) is included in the total inventory figure appearing on a financial statement.
What is completeness assertion in audit?
Completeness. The assertion is that all reported asset, liability, and equity balances have been fully reported. Existence. The assertion is that all account balances exist for assets, liabilities, and equity.
What accounts and assertions are informed by the confirmation of accounts receivable?
A positive confirmation from the customer confirms the existence assertion in the financial statements. Accounts receivable confirmations are generally more valuable in proving existence assertions than other standard assertions, such as completeness, according to the AICPA.
What are the common substantive audit tests for accounts receivable?
Types of Substantive Tests Issue a bank confirmation to test ending cash balances. Contact customers to confirm that accounts receivable balances are correct. Observe the period-end physical inventory count. Confirm the validity of inventory valuation calculations.
What assertions do AR confirmations test?
Existence Assertion The actual existence of transactions is one assertion that accounts receivable confirmations can prove. For example, the auditor requests that a customer confirm that the customer holds an account balance with the company being audited.
How the auditor tests the accuracy objective for accounts receivable?
The auditor should compare general ledger balances to actual receivables listing to confirm their accuracy. The auditor should review the justification for large amounts and the journal entries should be fully documented. This is to ensure the accuracy and Completeness assertion.
Why is completeness important in auditing?
Completeness It’s critically important for all transactions in a given accounting period to be recorded properly. When confirming completeness, auditors verify that this is the case. Examples include: Verifying all salaries and wages are fully recorded in the proper accounts and correct accounting period.
How do you audit accounts receivable?
How to Audit Accounts Receivable
- Trace receivable report to general ledger.
- Calculate the receivable report total.
- Investigate reconciling items.
- Test invoices listed in receivable report.
- Match invoices to shipping log.
- Confirm accounts receivable.
- Review cash receipts.
- Assess the allowance for doubtful accounts.
Which of the audit assertions for cash and accounts receivable would confirmations be most relevant?
Accounts receivable confirmations are generally more valuable in proving existence assertions than other standard assertions, such as completeness, according to the AICPA.
How do auditors test accounts receivable?
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.
How do you determine completeness?
To test for completeness, the audit team should sample purchase orders, receiving reports, and invoices and trace them to the purchase journal (the purchase journal should reconcile with expenses in the financial statement).
How do you determine completeness and accuracy?
Procedures. There are generally two ways to gain assurance for completeness and accuracy. One is to compare the report to information or data external to the system and the other is to compare the report to the internal database.
How do you ensure completeness and accuracy?
Which of the following assertion is supported by confirmation of accounts receivable?
The actual existence of transactions is one assertion that accounts receivable confirmations can prove. For example, the auditor requests that a customer confirm that the customer holds an account balance with the company being audited.
Which audit evidence are appropriate for accounts receivable?
How do you check completeness assertion while performing audit of accounts payable?
Example: tests of completeness in accounts payable audit include:
- Obtain accounts payable listing the client and perform casting and cross-casting to the general ledger to ensure their balances are matched.
- Select a sample of suppliers’ statements and reconcile them to the accounting records.
