Babarmahal Trading Ltd (BTL) is a wholesaler of Chinese goods and all accounting information is stored on BTL‟s computer. You are the audit senior in charge of the audit of the receivables balance. Explain the audit procedures that should be carried out on the receivables balance at BTL.

Auditing and Assurance Revision Questions and Answers

Answer
Procedures for verification of receivable balance of BTL are prescribed below:
 Cast the receivables ledger to ensure it agrees with the total on the receivables control account.
 Compare the balance on each receivable account with its credit limit to ensure this has not been exceeded.
 Review the balances in the receivables ledger to ensure no balance exceeds total sales to that customer.

 Calculate receivables days for each month end to monitor control of receivables over the year.
 Stratify receivables balances to show all material items and select appropriate sample for testing.
 Produce an aged receivables analysis to assist with the identification of irrecoverable receivables.
 Obtaining the external confirmations as per NSA 505 and evaluating whether the results of the external confirmation process together with the results from any other audit procedures performed, provide sufficient appropriate audit evidence regarding the assertion being audited. In conducting this evaluation, the auditor considers the guidance provided NSA 330 and NSA 530, “Audit Sampling and Other Selective Procedures.”



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