Substantive procedure for trade receivables

An audit procedure that is concerned with monetary amounts is primarily substantive https://opentuition.com/topic/audit-procedure-16 Therefore to reconcile any numbers ("data elements") from separate sources is substantive. Reconciliation means that the numbers are not expected to agree - but the sources of the difference are understood (and can be verified). The most common reconciliations relevant to AA are: (a) Bank reconciliation; (b) Trade receivables control account reconciliation; (c) Supplier’s statement reconciliation. (b) Reconciles the balance on the trade receivables control account in the general ledger to the total of the list of balances extracted from a separate trade receivables/sales ledger. Reconciling items might include: • Casting errors (i.e. addition errors) in a book of prime entry (affects only the total) will give rise to an error in the control account. • Omissions or duplicated postings of individual transactions (affect only the list of balances). • Transposition errors (in individual amounts or totals) will result in errors (in the individual and control accounts, respectively). • Contra-entries (i.e. offsetting a receivable against a payable when a customer is also a supplier) in individual accounts not recorded in control accounts. • Irrecoverable debt write-offs in individual accounts are not recorded in the control account. • Casting error in balancing off accounts (individual or total). • Errors in extracting the list of individual balances: — Omission; — Recording credit balances in trade receivables ledger as being a debit. This is ASSUMED knowledge of FA/F3. The other reconciliations are similarly assumed knowledge. BUT NOTE!!!! When the client carries out such reconciliations routinely - typically as end of month procedures (as well as at the reporting date) - they are "control activities" - i.e. part of the entity's system of internal control. In this case - the auditor simply checking "has the reconciliation been performed" - Y/N? "has the reconciliation been evidenced as reviewed" - Y/N? These are tests of controls.