Table of Contents

Chapter 1 - Auditing Receivables. 1

Auditor Objectives. 1

Auditing Characteristics of Receivables. 2

Receivables Process Flow.. 3

Receivable Schemes. 3

Diversion of Collections on Old Receivables. 3

Lapping. 4

Fake Receivables. 4

Fake Notes. 4

Auditing Activities. 4

Inherent Risk Assessment 4

Material Misstatement Assessment 5

Accounts Receivable Aging Report 5

Substantive Procedures. 6

Examine Accounts Receivable Aging Report 7

Inspect and Confirm Notes. 7

Confirm Receivables. 7

Positive Confirmations. 9

Negative Confirmations. 9

Mixed Confirmations. 9

Sample Confirmation. 10

Confirmation Sample Size. 12

Dealing with Discrepancies. 12

Dealing with Nonresponses. 12

Management Refuses to Allow Confirmations. 13

Confirmation of Write-Offs. 13

Review Cutoff 13

Test Notes Receivable. 13

Fair Value Option. 14

Evaluate Receivables Accounting. 14

Examine Allowance for Doubtful Accounts. 14

Investigate Legal Encumbrances. 15

Search for Related Parties. 16

Conduct Analytical Procedures. 16

Review Presentation. 17

Internal Controls Used by the Client 17

Advance Work. 19

Review Questions. 20

Chapter 2 - The Allowance for Doubtful Accounts. 21

Estimation of the Allowance for Doubtful Accounts. 21

Accounting for the Allowance for Doubtful Accounts. 22

The Direct Write-off Method. 23

Review Questions. 25

Chapter 3 - Accounting for Notes Receivable. 26

Notes Receivable. 26

The Amortization Schedule. 27

Imputed Interest 28

Review Questions. 31

Answers to Chapter Questions. 32

Glossary. 36

Index. 38

Final Examination...40