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ma’am what is the difference between audit procedures of aged analysis and calculation of receivables days?
Both serve the same purpose of assessing the bad debts and allowance for doubtful debts, however how are the 2 processes different?
The auditor is confined to performing only one procedure per assertion but must accumulate sufficient evidence. If receivables are material and the auditor has an expectation that receivables days will be 60 days (because that’s what it was last year and the year before) – if it’s still 60 days that – alone – would not be sufficient evidence that whatever has been allowed for “doubtful” debts is sufficient.
Management should be making allowances considering the age of the debt say:
Up to 30 days (the credit period allowed) – 0%
31-60 days – 2%
61-90 days – 5%
91-120 days – 15%
121-150 days – 50%
>150 days – write offSo the auditor will carry out some tests of details on the client’s aged analysis to confirm the age of the debts for a sample of customers.
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