

Auditing Accounts Receivable « Sales (continued)

Compare recorded sales to invoices & shipping documents to determine that goods
were sold & shipped

 Compare deposits to dates receipts were recorded to verify absence of lapping

 Examine subsequent collections & shipping documents for receivables for which positive
confirmations were not returned

P & D-management asserts that amounts reported as sales & accounts receivable are prop-
erly classified on the financial statements & any pertinent information is adequately disclosed

 Inquire of management as to whether any accounts receivable are pledged as collateral

for a loan

 Ascertain whether receivables from related parties are identified for disclosure purposes
 Examine accounts receivable listing to verify that loans from officers & other amounts
are not included

 Examine loan agreements for indication of pledging of receivables

 Examine financial statements & disclosures to make certain that accounts receivable is
properly presented & disclosed

 Examine minutes of directors meetings for indications of accounts receivable financing

Focus on
Evidence - Module 3
110

Auditing Invento~
R & O-management asserts that the company owns the inventory reported & that it has not
been pledged as collateral for a loan

 Inquire of management if inventory is being held on consignment or has been

pledged
as security
 Examine loan agreements to determine if inventory is pledged as security
 Examine purchase invoices to verify that inventory is owned rather than held on
consign-
ment
 Examine minutes of directors meetings for indications of inventory financing

Focus on 111
Evidence - Module 3