Hello sir ,
within the substantive procedures for the receivables is:(q232 Jasmine-Kaplan kit 2020-2021)
Inspect post year?end sales returns/credit notes and consider whether an
additional allowance against receivables is required.
now here if the auditors finds the credit not is relating to the current year sales here what will be effect
So can we say immediately that we have to increase receivables provision or any other effects
that we have to consider,
As we know that will affect the valuation of the receivables also.
Can we also think also about the management credibility of increasing the current year sales,
Thanks,
Ask the Tutor ACCA AA
Post year end credit notes and the allowance
It would depend ... for example:
If a credit note issued after the y/e is for goods returned by the customer before the y/e, you would be checking that the cut-off was accurate - i.e. that the current year sale has been "reversed" (Dr Revenue/Cr Receivables) and the goods included in inventory (at lower of cost and NRV). This doesn't increase the receivables allowance (don't call it a provision - it is not a liability) - the allowance is for credit losses ("bad and doubtful debts").
You wouldn't doubt management's credibility unless the credit notes suggested that they were reversals of fictitious sales - e.g. if the goods were never dispatched (!)
Thanks a lot sir.
You are welcome!
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