Receivables can be tested in section A or section B of the exam. Section B of the exam may ask you to describe the substantive audit procedures you would perform to obtain sufficient and appropriate evidence for assertions relating to receivable. Alternatively, a section A question could ask you to select an appropriate procedure from a list of procedures to provide evidence over a particular assertion.
It is worth noting that where an exam question asks specifically for audit procedures for receivables, no marks would be awarded If you identify audit procedures relevant only for prepayments, for example.
You must ensure that you are fully conversant with the 'standard' procedures, such as the confirmation of receivables. The receivables confirmation is primarily designed to test the client's entitlement to ceceive debt, not the customer's ability to pay. Auditors also need to consider cut-off for receivables. Revenue testing is often carried out in conjunction with the audit of receivables, as the two are linked. We also briefly consider the audit of prepayments.
You will need the knowledge of the accounting standards you learnt in your Fundamentals in Financial Accounting (FFA) exam relating to receivables for this chapter.
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