In an accounts receivable audit, an auditor systematically assesses the accuracy, completeness, valuation and actual existence of accounts receivable, as well as how well the organisation manages these receivables. In practice, this goes much further than simply checking the figures in the accounts.

The auditor begins by comparing the accounts receivable records with the financial reporting to verify that the outstanding amounts in the balance sheet correspond to the underlying customer data and balances. This involves reviewing both the general ledger balance and detailed reports such as an ageing analysis of accounts receivable, which shows how long receivables have been outstanding and which items carry risk.

In addition to this numerical reconciliation, the auditor examines how invoices are linked to customer orders and deliveries, checks whether payments have been processed correctly and whether credit notes have been created correctly and on time. This helps to identify errors, incorrect entries or periods in which sales have been recorded incorrectly.

An important part of this is confirming outstanding balances with customers, whereby external confirmations are used to verify whether the registered debtors actually exist and agree with the amounts stated. This contributes to reliable financial information.

The auditor also assesses the internal controls and processes surrounding accounts receivable management, such as credit assessment, invoicing and collection procedures, and control measures to prevent errors or fraud. This also includes looking at provisions for doubtful accounts – are the reserves realistic, are old or uncollectible items written off in a timely manner, and is there a consistent policy for payment arrangements?

This combination of documentation checks, process assessments and external verifications gives you a complete picture of the quality and reliability of your accounts receivable portfolio. This allows you to better understand the risks associated with collection and financeability and to implement improvements in policy and management where necessary.