ACCOUNT RECEIVABLE CONFIRMATION
Audit Objectives
1.To determine that receivables exist as of the balance sheet date.
2.To verify the existence of the accounts receivables.
3. To determine that receivables stated in the balance sheet represent authentic obligations owed to the company.
4. To verify whether balance of accounts of the debtors are accurate.
Assertions Affected
1. Existence
2. Rights and Obligations
3. Valuation
Audit Procedures
1. Conduct sampling from list of customers to be confirmed.
2. Construct a confirmation letter.
3. Send confirmation letter to the clients.
4. Obtain replies of the confirmation letters from the clients.
5. Review clients’ accounts and compare it with the clients confirmation of their accounts.
6. Perform alternative procedures on accounts that do not respond to positive confirmation requests.
7. Vouch cash receipts after the confirmation date for subsequent payment.
8. Vouch sales invoices and shipping documents
9. Note for material differences.
Findings
The following are the AR Confirmation results:
No Reply: Not Included in Send Out of Confirmation:
1. Eagle Contractors 1. Lighthouse Commercial
2. Valera Company 2. Solomon Enterprises
3. Legarda Company 3. Carlo Santos
4. Dynasty Construction 4. Chad Acosta
5. Benitez Merchandising 5. Johann Morales
6. J.R. Alano 6. Luli Samson
Moreover, the AR Confirmation revealed that:
1. Louie Tan paid P484,000.00 on December 28, 2011 evidenced by OR#118. His account balance should have
been P800,000.00.
There is no PAJE to be recorded since it was already reflected in C2 PAJE #1.
2. Susan de Leon's account has been paid in full on December 31, 2011 evidenced by OR#122.
There is no PAJE to be recorded since it was already reflected in C2 PAJE #1.
3. Rex Enterprises confirmed his account to be correct but not yet due.
4. J. R. Alano Trading confirmed its account to be P1,600,000.00, not P150,000.
PAJE 1 Accounts Receivable JR Alano Trading 1,600,000.00
Accounts Receivable JR Alano 1,600,000.00
To remove the double recording of JR Alano Trading's account
PAJE 2 Sales 150,000.00
Accounts Receivable JR Alano Trading 150,000.00
To adjust JR Alano Trading's account to the right balance
The accounts that have confirmed to be correct are:
1. Alberto & Associates CPA's
2. Anna Reyes
3. Gwendo Reyes
4. Building Blocks, Inc
5. Roces, Adriano and Salas, CPAs
6. R.V. Castro & Co.
Conclusion
After going through with the AR confirmation letters sent to clients, it came to the attention of the auditors that there
are some customers that are not included in the list of send out confirmation letters and that some customers were not
able to send back there replies. Thus, to confirm the existence, valuation and whether these AR accounts are authentic
obligations to the company, the auditor did a vouching of the Sales Invoices, Sales Order, Cash Receipts Journal and
Shipping Documents. Other than the proposed adjusting journal entries above there are no exceptions found. (See E2.1
for the summary of the AR confirmation results and the AR balance after the recognizing the PAJE)
Prepared by: Date:
JC 03/20/2021
Reviewed by: Date:
