Substantive procedures for receivables

From my understanding to this is that, valuation is coming up with a final number for the figures on FS, in this case, receivables, so normally the figure of A/R on the FS comes from the opening balance carried forward from last year plus credit sales(unsettled to the end of the year) less amount regarded as “unrecoverable” , so in an other word, allowance for receivables or provisions for receivables.

so the assertion of receivables on valuation implies that the figure on the FS is accurate and proper valuation has been done by doing above formula. Here is the auditors’ turn, the auditor needs to make sure that directors have done it as per IAS, to check that…..he can do with out recalculating it, just to ask management about how they do the valuation, if its reasonable as per IAS then auditor will be a bit convinced on the accuracy of the value on the FS related with receivables….then auditor can question further how the estimate of allowance for receivables came up…then other procedures will be necessary.

Adequacy of allowance means to sufficiently meet requirements, which is following proper valuation methods….so once auditor asks management on how their number on the FS meets the valuation requirements as per IAS, they will tell him how they do…and that is it, then auditor can further take other procedures to make sure their assertions are correct…..like, recalculating allowances as per auditors’ expectation, because our fear(as auditors”) is that management can use past experience to estimate the allowance for this year whilst this year it was totally different from past years because may be a big customer went bust which we had not expected and hence overstating A/R.