ACCOUNTS RECEIVABLE/COLLECTIONS

AUDIT WORK PROGRAM

Project Team (List Members):

Project Phase Date Comments

Planning
Fieldwork
Report Issuance (Local)
Report Issuance (Worldwide)

Time Project Work Step Initial Index

PLANNING
1. Conduct project planning, scope setting and
auditee requests/coordination.
2. Coordinate meetings with key process personnel.
3. Review ABC internal days sales outstanding
(DSO) project reports.
4. Meet with external audit to obtain an understanding
of testing performed and issues identified. Coordinate
scope and work steps to avoid duplication of efforts.
5. Review known best practices for benchmarking and
process information on the following topics: Accounts
receivable, credit and collections.
6. Develop work program and other reporting templates.
FIELDWORK
Understand and Document the Process
1. Obtain and review written (and "desktop") policies
and procedures and organizational charts for
receivables collections areas, including credit, billing,
remittance processing and collections.
2. Review memos over the process areas prepared
by external audit. Ensure that information is still
current.
3. Obtain an understanding of and document the
receivables collections process via high-level process
maps.
4. Prepare a timeline of the accounts receivable cycle
from credit through collections.
5. Identify key business risks and mitigating controls.
6. Gain an understanding of the following while
conducting interviews:
a) Management's goals and strategy regarding

1
Time Project Work Step Initial Index
receivables collections
b) Efficiency and effectiveness of the receivables
collection process in meeting management's goals
c) Performance measures used by management to
evaluate the receivables collection process
7. Review and evaluate key management reporting
tools for adequacy.
IMPROVEMENT OPPORTUNITIES
1. Review and understand the following. Draft any
questions which may be asked during interviews and
while process mapping. Interview appropriate
personnel and evaluate ABC's practices.
a) Eliminate barriers to payment.
b) Use the credit and collections process to enhance
customer satisfaction.
c) Automate the remittance processing function.
d) Assign and update customer credit ratings.
e) Develop, motivate and monitor collections
specialists.
f) Outsource the collections function and monitor the
vendor's performance.
g) Identify and act on distressed and delinquent
accounts.
2. Based on interviews, review of policies and
procedures, and testing of each of the process areas
below, identify and evaluate ABC's practices.
CREDIT MANAGEMENT
1. After reviewing external audit process memos,
interview key credit department personnel in order to
gain an understanding of the credit approval and
monitoring processes. Identify personnel ultimately
responsible and accountable for this process.
2. Understand how policies and procedures are enforced
and how compliance is monitored.
3. Understand and evaluate the following processes:
a) Customer credit rating system and scoring
process
b) Credit approval policy and credit limits
c) Process for monitoring and reevaluation of credit
standings
d) For each of the above areas, identify the
personnel responsible and ensure that proper
segregation of duties exists and that it is
appropriately monitored
4. Assess the adequacy of the internal controls
currently in place to mitigate business risks in this
area.

2
Time Project Work Step Initial Index
TESTING
Note: Testing may include compliance with existing
policies and procedures, completeness and accuracy of
recording, proper authorization, proper documentation,
and timeliness.
1. Select X-X customer accounts from the aged trial
balance and test each account to ensure that credit
was granted in compliance with corporate policy.
Items should be >60 days and >5% of total A/R
balance. If appropriate, stratify the sample ensure
that it includes credits from the past six months as
well as previously existing credits.

2. Review the credit rating for X customers. Ensure that

credit classifications are in alignment with scoring
policies. Investigate and document any
discrepancies.
3. Assess the efficiency and timeliness of the credit
approval process. Note any activities that could be
automated.
4. Assess the efficiency and timeliness of the credit
monitoring process. Note any activities that could be
automated.
INVOICING AND CREDIT MEMOS
1. After reviewing the external audit process memos,
interview key invoicing department personnel in order
to gain an understanding of the credit approval and
monitoring processes. Identify personnel ultimately
responsible and accountable for this process.
2. Understand how policies and procedures are enforced
and how compliance is monitored.
TESTING
Note: Testing may include compliance with existing
policies and procedures, completeness and accuracy of
recording, proper authorization, proper documentation,
and timeliness.
1. From the A/R aged trial balance, select X invoiced
transactions. Ensure that invoicing procedures
occur in a timely manner and are in compliance with
policies and procedures. Check invoices for
accuracy.
2. Understand the process for consolidating invoices.
Select X consolidated invoices and review for
accuracy, timeliness, and compliance with policies
and procedures.
3. From the A/R aged trial balance, select X credit
memos. Ensure that credit memo procedures occur

3
Time Project Work Step Initial Index
in a timely manner and are in compliance with
policies and procedures. Check for accuracy.
4. Obtain a list of credit memos issued during the past
two quarters. Select X items and trace to supporting
documentation. Ensure that they were issued and
approved in line with corporate policy and
procedures.
5. Assess the adequacy of the internal controls currently
in place to mitigate business risks in this area.
6. Assess the efficiency and timeliness of the invoicing
process. Note any activities that could be automated.
REMITTANCE PROCESSING
1. After reviewing external audit process memos,
interview key billing department personnel in order to
gain an understanding of the credit approval and
monitoring processes. Identify personnel ultimately
responsible and accountable for this process.
2. Understand how policies and procedures are enforced
and how compliance is monitored.
TESTING
Note: Testing may include compliance with existing
policies and procedures, completeness and accuracy
of recording, proper authorization, proper
documentation, and timeliness.
1. Select X cash receipts. Ensure that all receipts are
posted in a timely manner and procedures are in
compliance with policies and procedures.
2. Understand what types of payment methods are
accepted.
3. Assess the adequacy of the internal controls currently
in place to mitigate business risks in this area.
4. Assess the efficiency and timeliness of remittance
processing. Note any activities that could be
automated.
COLLECTIONS
1. After reviewing external audit process memos,
interview key invoicing department personnel in order
to gain an understanding of the credit approval and
monitoring processes. Identify personnel ultimately
responsible and accountable for this process.
2. Understand how policies and procedures are enforced
and how compliance is monitored.
TESTING
Note: Testing may include compliance with existing
policies and procedures, completeness and accuracy of
recording, proper authorization, proper documentation,
and timeliness.

4
Time Project Work Step Initial Index
1. Review the A/R aged trial balance for unusual and/or
large balances. Investigate significant items [>60
days and >5% (absolute value) of total A/R balance.]
Perform the following:
2. Review detail of significant past due balances and
discuss with management. Obtain and document the
probability of collectability and plans for collection.
3. Inquire as to what steps have been taken to collect on
these accounts. Review online notation, dunning
letters, collection logs or other documentation.
4. Understand policies and procedures related to the use
of external collection agencies. Understand how
performance is monitored and measured.
5. Understand account write-off policies and procedures.
Obtain a list of accounts written off in the past two
quarters and review support for charges and
authority for write-off. Review customer files or other
documentation to see whether any sales were made
to accounts after write-offs.
6. Assess the efficiency and timeliness of collections.
Note any activities that could be automated.
ACCOUNTING/MISCELLANEOUS
1. Review the policy for allowance for doubtful accounts
for reasonableness. Obtain the current calculation
and ensure that is in accordance with the policy.
2. Obtain calculation and analysis of DSO. Review for
accuracy and appropriateness.
3. Review the timeline prepared under "Understand and
Document the Process" above. Understand and
document timing issues that may affect DSO,
including time lags which may occur from service
delivery to invoicing. Evaluate the effect of these
issues on current DSO.
4. Review A/R reconciliation to G/L. Verify timeliness.
5. Review calculation of A/R reserved amounts. Verify
calculations and reasonableness.
6. Review/evaluate management reporting
reports/reconciliations (including process
performance metrics, budget to actual commission
expense, target earnings, quotas, etc.).
REPORTING
Prepare report on procedures, findings and
recommendations.

Total Project Effort

Cost by Level

5
Time Project Work Step Initial Index
Estimated Project Expenses
Total Project Costs