Page 18 - eBook Audit Of Financial Statement Components

A daily cash summary and validated cash slips before the

year-end are also reviewed by the auditors to ensure that

the cash receipts are properly recorded.

If the auditors are present during the cash counts at the

year-end, the auditors may observe that all collections
received for the day are included in the cash on hand

record and are credited to account receivables.

TEST OF DETAILS OF BALANCES

Test of details of balances are concerned with obtaining evidence
Test of details
about account receivable balances. The tests are not concerned
of balances
about debit or credit transactions but the balance at the end of
are concerned the period. They also focus on the adequacy of the allowance for

with obtaining doubtful debts.

evidence
i. Confirmation of Balances
about account
A written confirmation is sent to individual customers to
receivable
confirm the amount outstanding and payable from the
balances at
customers. Responses to a confirmation request are
the end of the
considered to be highly reliable because they come from
period.
third parties. The confirmation provides evidence as to

existence and rights and valuation of the account
receivable. However, it does not provide evidence of

completeness.

The confirmation is only used when the amounts are
material and it is highly likely that the debtors will

respond to the confirmation.

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