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132CHAPTER 11 - Accounts Receivable Notes Receivable and...

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1 Bob Anderson, UCSB CHAPTER 11-1 11 CHAPTER Accounts Receivable, Notes Receivable, and Revenue Bob Anderson, UCSB Intro & Chapter 11-2 TESTING ACCOUNTS RECEIVABLE When testing accounts receivable, we are also testing? INCOME STMT: SALES and bad debt expense BALANCE SHEET: Allowance for doubtful accts Therefore in MANY businesses, testing receivables is a critical test of the company’s operating activities. Bob Anderson, UCSB Intro & Chapter 11-3 Management Assertions When auditors test accounts receibable, what management assertion/s are they MOST interested in? Valuation- did they record enough bad debt expense Existence/ Cutoff- are these valid (NOW/ timing/ revenue recogn.) What about the others: Completeness Not as concerned, but there might be some cut-off issues to consider. Rights and Obligations Are these related to sham transactions, sale lease-back, etc. Presentation & Disclosure Have the receivables been pledged? Do they secure something?
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