During the process of verifying trade debtors, the auditor needs to ascertain adequate internal controls on the client’s accounting system which in particular sales.
The auditor will need to be satisfied that:
- all orders received are correctly executed;
- an invoice is produced for all goods dispatched;
- credit is given only in approved circumstances;
- customers are charged the correct amount;
- all invoices are correctly recorded in the ledger;
- all customers’ returns are dealt with and credit notes issued only with the appropriate authority;
- an age analysis of debtors is produced regularly and unpaid accounts are chased;
- adequate procedures are present regarding the control of cash received from debtors;
- all cash received is relate to invoices and recorded in the ledger;
- a debtors’ ledger control account is maintained and agreed at the end of each month to a detailed list of balances.
The auditor will obtain evidence that the above re: accounting systems and internal controls are satisfactory by either:
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