How The Direct Examination Of Debtors Is Actually Conducted By An Auditor?

How The Direct Examination Of Debtors Is Actually Conducted By An Auditor?

The process of verification of book debts by an Auditor is a common practice in the business company. However, this is done by the company officials to know the actual amount that needs to be recovered from the customers based on the written records. Or, in other terms, the company can regard this book debts as a useful reference to know about its assets being provided on rent to outsiders.

Here goes the list of procedures carried out by Auditor.

  • The primary duty is to collect all the relevant records that detail the duration of the lending period, and the time for recovering it as per the deal signed. In fact, this would be based on the effective internal control that the Auditor has on the business organization.
  • Further, he should evaluate the balances as per the debtors’ schedule and those registered with the ledger accounts respectively. Thus, the overall balance should be noted down and any difference observed with this regard should be thoroughly questioned.
  • The method of subsequent realizations can be employed for those explicit cases where direct assurance is a must. This is usually the case with chief customers who have taken a significant source of debt from the company. By doing so, the Auditor can confirm the truth by himself and satisfy himself with the level of accuracy he obtains on the case.

While analyzing the debtor’s schedule, the Auditor should have to examine the following aspects like

  • Whether the dates comply with the age that is already been listed in the debt records and also if the age has been calculated on a fair basis.
  • Further, the outstanding credits in the form of currency hold the real assets that are strictly under the concern and do not lie in the overdue section by any means.
  • He has to ensure the transactions made from the company accounts to the other financial accounts and this is considered as a part of collecting evidence.
  • In addition, all the provisions provided by the company in terms of discounts or some type of allowance should all be recognized so that it becomes helpful for realizing the original balance that needs to be credited.
  • There can be cases of doubtful debts which should be investigated in the following pattern
  1. Check if there has been a situation where the credits have been frequently ignored for any specific reason.
  2. Or, a reliable turnover has been declined in the account and so on.





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