Audit procedures

In this lesson

1. 0:00 Audit procedures for receivables assertions
2. 0:38 Direct confirmation of receivables balances
3. 2:29 Positive vs negative confirmation methods
4. 3:29 Investigating differences in confirmation responses
5. 4:19 Cut-off testing for sales and receivables
6. 5:31 Cut-off summary: pre and post year-end
7. 6:45 Additional receivables audit procedures
8. 8:19 Testing sales transactions for receivables assurance
9. 9:34 Practice question: valuation assertion
10. 10:43 Auditing prepayments calculations

About this lesson

You'll discover how to test the existence, valuation, and cut-off of receivables through direct customer confirmations, cash receipt verification, and goods dispatch analysis. You'll also master the practical steps for auditing prepayments and understand how to investigate discrepancies when they arise. The lesson covers two key audit techniques. Direct confirmations involve asking customers to confirm their outstanding balances in writing, either positively (requesting explicit confirmation) or negatively (requesting response only if they disagree). Cut-off testing ensures sales are recorded in the correct period by matching invoice dates to goods dispatch notes, preventing receivables overstatement. Both methods provide evidence over existence, valuation, and completeness assertions. You'll also explore how to handle common audit challenges. When confirmation responses show differences from your records, the lesson shows you how to investigate timing differences, disputed amounts, and adjustments rather than assuming errors. Additional procedures covered include analytical reviews of aged receivables listings, tracing dispatch notes through to the sales ledger, and reviewing post-year-end cash receipts as indirect evidence of valuation. The prepayments section demonstrates how to verify calculations, check supporting documentation like invoices and service periods, and apply proportionate testing based on materiality. By the end, you'll understand how receivables and sales testing are interconnected, and you'll be confident applying these procedures in both objective test questions and case study scenarios.

Duration: 12m