Accounts receivable audit
Does the receivable really exist, and will it be collected
Go to the «Voluntary audit» serviceChecked against the official source:
Accounts receivable is a line item that looks like an asset on the balance sheet but is not one if the debt will not be paid. The audit answers two questions: does the receivable actually exist, and how likely is it to be collected.
What is tested
- Existence of the receivable — confirmations sent by counterparties directly to the auditor
- Ageing analysis
- Primary documents supporting the basis of the debt
- Overdue receivables and the procedure for writing them off
- Reasonableness of the allowance for doubtful debts
Why a confirmation matters more than a reconciliation statement
A reconciliation statement signed by both parties is good evidence, but it is obtained through the company being audited. That is why, for material amounts, the auditor sends requests to counterparties independently and receives the replies directly.
Debts that will not be repaid
A receivable that has sat unchanged for years yet is still carried at its full amount is the most common finding. It overstates both assets and financial results at the same time, and a write-off postponed indefinitely only increases the future loss.
Audit procedures
- external confirmations from debtors — the auditor's right to obtain written confirmations from third parties (Article 28 of Law ZRU-677 on Auditing); if there is no reply, alternative procedures: subsequent payment, shipping documents;
- ageing and turnover analysis;
- assessment of the allowance: under IFRS 9 — expected credit losses on financial assets;
- review of write-offs and related party transactions.
Tax aspect
Bad receivables subject to write-off are grounds for adjusting the VAT base in the manner approved by the Cabinet of Ministers (Article 257 of the Tax Code). Loans and debts of related parties are tested separately.
Check settlements with counterparties
We will confirm that receivables exist and assess whether an allowance is needed.
Go to the «Voluntary audit» serviceFrequently asked questions
What should be done with a receivable that cannot be collected?
Its carrying amount should reflect the real likelihood of collection — through an allowance or a write-off in the established manner. The procedure and tax consequences depend on the grounds and supporting documents.
What does the auditor do if a debtor does not respond to the request?
The auditor performs alternative procedures: checks subsequent receipts and primary shipping documents.
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