Evidence - Substantive Procedures

Question 1

Establish the completeness of receivables transactions?

Answer 1

Perform sales cutoff tests for the month following year-end to obtain assurance that sales transactions are recorded in the proper period. Performing cutoff tests on sales recorded in January of the subsequent year will reveal whether December sales were recorded in the wrong period.

Question 2

Determine that the valuation of receivables is at appropriate net realizable values.

Answer 2

Review the aged trial balance for significant past-due accounts. This provides evidence on how much is expected to be realized on receivables.

Question 3

Determine that the disclosures required by GAAP are properly presented.

Answer 3

Review notes and other disclosures in the financial statements. This should allow the auditor to identify omissions and incorrect disclosures.

Question 4

Establish that the client has rights to the recorded receivables.

Answer 4

Vouch ending accounts receivable balances to sales agreements. Sales agreements will disclose terms of the related sales and client rights.

Question 5

Establish the gross valuation of receivables.

Answer 5

Vouch ending accounts receivable balances to sales agreements. Sales agreements will include the amounts that goods were sold at.