How to Audit Debtors/Creditors/Foriegn Exchane Fluctuations
This query is : Resolved
04 June 2009
Plz help me how to Audit Drs/crs & F.E. fluctuations in Internal Audit.
plz help me
plz help me
05 June 2009
Just follow the steps as given below:-
1. Take a print out of opening debtors/creditors ledger(previos years closing)
2. take a transaction list of current year with all debtors and creditors
3. now check with cash and bank account to see the realisation and repayements
4.now check the each receipt or payement from or to a particular party with their opening balances and co-relate the amount with balance or transaction then u will be in a position to see the realisation is bill wise or on account.
5. just scutnise the account with critical view.
Foreign exchange fluctuation
1.just take a print of exchange rates corresponding to transaction date.
2.go through with each transaction
3. take a list of transaction not setteled on reporting date.
4. calculate exchange fluctuation from the above and
5.see that all exchange flucatuation is transferred to p&L account.
CA vinoid lalwani
1. Take a print out of opening debtors/creditors ledger(previos years closing)
2. take a transaction list of current year with all debtors and creditors
3. now check with cash and bank account to see the realisation and repayements
4.now check the each receipt or payement from or to a particular party with their opening balances and co-relate the amount with balance or transaction then u will be in a position to see the realisation is bill wise or on account.
5. just scutnise the account with critical view.
Foreign exchange fluctuation
1.just take a print of exchange rates corresponding to transaction date.
2.go through with each transaction
3. take a list of transaction not setteled on reporting date.
4. calculate exchange fluctuation from the above and
5.see that all exchange flucatuation is transferred to p&L account.
CA vinoid lalwani
05 June 2009
Thanks for your reply!!
but Tell me is there any documentation availabe from co to check FE Fluctuations????
means payt schedule shuld be taken out from co or wht documentation shld i take from Co.
I need urgent reply.
with Lots of Thanks
but Tell me is there any documentation availabe from co to check FE Fluctuations????
means payt schedule shuld be taken out from co or wht documentation shld i take from Co.
I need urgent reply.
with Lots of Thanks
28 July 2024
Auditing debtors (accounts receivable), creditors (accounts payable), and foreign exchange (FX) fluctuations are crucial aspects of internal audits. Each area has its own specific considerations and documentation requirements. Here’s a detailed guide on how to conduct these audits:
### **1. Auditing Debtors (Accounts Receivable)**
**1.1. **Obtain Documentation:**
- **Customer Ledgers:** Obtain and review the detailed ledgers for all debtors.
- **Invoices:** Collect copies of invoices issued to debtors.
- **Receipts:** Gather records of payments received from customers.
- **Reconciliation Statements:** Obtain reconciliation statements for debtors’ accounts.
**1.2. **Perform Procedures:**
- **Verify Balances:** Reconcile the balances in the debtor’s ledger with the trial balance and financial statements.
- **Confirm Receivables:** Send confirmation requests to a sample of debtors to confirm the amounts outstanding.
- **Check Aging Analysis:** Review the aging analysis of receivables to identify overdue accounts and assess collectability.
- **Review Credit Policies:** Examine the company’s credit policy and compare it with actual practices.
- **Evaluate Provisions:** Check the adequacy of provisions for doubtful debts and compare it with historical data and industry standards.
**1.3. **Documentation and Evidence:**
- **Customer Statements:** Ensure that customer statements are reconciled with the company’s records.
- **Collections:** Verify the collection process, including follow-up on overdue accounts.
- **Write-offs:** Review and approve any write-offs of bad debts.
### **2. Auditing Creditors (Accounts Payable)**
**2.1. **Obtain Documentation:**
- **Supplier Ledgers:** Obtain and review the detailed ledgers for all creditors.
- **Purchase Invoices:** Collect copies of purchase invoices received from suppliers.
- **Payment Records:** Gather records of payments made to suppliers.
- **Reconciliation Statements:** Obtain reconciliation statements for creditors’ accounts.
**2.2. **Perform Procedures:**
- **Verify Balances:** Reconcile the balances in the creditor’s ledger with the trial balance and financial statements.
- **Confirm Payables:** Send confirmation requests to a sample of creditors to confirm the amounts outstanding.
- **Review Aging Analysis:** Analyze the aging of payables to identify overdue payments and assess the accuracy of recorded liabilities.
- **Check Terms:** Review payment terms and ensure they are in line with contractual agreements.
- **Evaluate Provisions:** Assess the adequacy of provisions for expenses and compare it with historical data and industry standards.
**2.3. **Documentation and Evidence:**
- **Supplier Statements:** Reconcile supplier statements with the company’s records.
- **Payments:** Verify the payment process, including approvals and compliance with terms.
- **Accruals:** Review accruals for accuracy and completeness.
### **3. Auditing Foreign Exchange (FX) Fluctuations**
**3.1. **Obtain Documentation:**
- **Foreign Currency Transactions:** Obtain records of transactions in foreign currencies, including contracts, invoices, and payment receipts.
- **FX Rate Schedules:** Collect documentation on the foreign exchange rates used for conversions, including historical rates and the source of rates.
- **FX Reconciliation:** Obtain reconciliation statements for foreign currency accounts.
- **FX Gain/Loss Reports:** Review reports of foreign exchange gains and losses.
**3.2. **Perform Procedures:**
- **Verify Transactions:** Reconcile foreign currency transactions with supporting documentation and records.
- **Review FX Rates:** Ensure that the foreign exchange rates used for conversions are appropriate and consistent with the source of rates.
- **Check Valuation:** Verify that foreign currency balances are correctly valued at the closing rate and review any adjustments for unrealized gains or losses.
- **Assess Compliance:** Ensure compliance with accounting standards and company policies related to foreign exchange fluctuations.
**3.3. **Documentation and Evidence:**
- **Foreign Exchange Contracts:** Verify that contracts and agreements are properly recorded and reflect the terms of the foreign currency transactions.
- **Rate Schedules:** Check the accuracy of foreign exchange rate schedules and confirm they are updated regularly.
- **Gain/Loss Accounting:** Ensure that gains and losses from foreign exchange are correctly recorded in the financial statements.
### **Summary**
1. **Auditing Debtors:**
- Obtain customer ledgers, invoices, receipts, and reconciliation statements.
- Verify balances, confirm receivables, check aging analysis, review credit policies, and evaluate provisions.
- Ensure proper documentation and evidence of collections and write-offs.
2. **Auditing Creditors:**
- Obtain supplier ledgers, purchase invoices, payment records, and reconciliation statements.
- Verify balances, confirm payables, review aging, check terms, and evaluate provisions.
- Ensure proper documentation and evidence of payments and accruals.
3. **Auditing Foreign Exchange Fluctuations:**
- Obtain records of foreign currency transactions, FX rate schedules, FX reconciliation, and gain/loss reports.
- Verify transactions, review FX rates, check valuation, and assess compliance.
- Ensure proper documentation of contracts, rate schedules, and gain/loss accounting.
By following these steps and ensuring that all necessary documentation and procedures are in place, you can effectively audit debtors, creditors, and foreign exchange fluctuations as part of an internal audit.
### **1. Auditing Debtors (Accounts Receivable)**
**1.1. **Obtain Documentation:**
- **Customer Ledgers:** Obtain and review the detailed ledgers for all debtors.
- **Invoices:** Collect copies of invoices issued to debtors.
- **Receipts:** Gather records of payments received from customers.
- **Reconciliation Statements:** Obtain reconciliation statements for debtors’ accounts.
**1.2. **Perform Procedures:**
- **Verify Balances:** Reconcile the balances in the debtor’s ledger with the trial balance and financial statements.
- **Confirm Receivables:** Send confirmation requests to a sample of debtors to confirm the amounts outstanding.
- **Check Aging Analysis:** Review the aging analysis of receivables to identify overdue accounts and assess collectability.
- **Review Credit Policies:** Examine the company’s credit policy and compare it with actual practices.
- **Evaluate Provisions:** Check the adequacy of provisions for doubtful debts and compare it with historical data and industry standards.
**1.3. **Documentation and Evidence:**
- **Customer Statements:** Ensure that customer statements are reconciled with the company’s records.
- **Collections:** Verify the collection process, including follow-up on overdue accounts.
- **Write-offs:** Review and approve any write-offs of bad debts.
### **2. Auditing Creditors (Accounts Payable)**
**2.1. **Obtain Documentation:**
- **Supplier Ledgers:** Obtain and review the detailed ledgers for all creditors.
- **Purchase Invoices:** Collect copies of purchase invoices received from suppliers.
- **Payment Records:** Gather records of payments made to suppliers.
- **Reconciliation Statements:** Obtain reconciliation statements for creditors’ accounts.
**2.2. **Perform Procedures:**
- **Verify Balances:** Reconcile the balances in the creditor’s ledger with the trial balance and financial statements.
- **Confirm Payables:** Send confirmation requests to a sample of creditors to confirm the amounts outstanding.
- **Review Aging Analysis:** Analyze the aging of payables to identify overdue payments and assess the accuracy of recorded liabilities.
- **Check Terms:** Review payment terms and ensure they are in line with contractual agreements.
- **Evaluate Provisions:** Assess the adequacy of provisions for expenses and compare it with historical data and industry standards.
**2.3. **Documentation and Evidence:**
- **Supplier Statements:** Reconcile supplier statements with the company’s records.
- **Payments:** Verify the payment process, including approvals and compliance with terms.
- **Accruals:** Review accruals for accuracy and completeness.
### **3. Auditing Foreign Exchange (FX) Fluctuations**
**3.1. **Obtain Documentation:**
- **Foreign Currency Transactions:** Obtain records of transactions in foreign currencies, including contracts, invoices, and payment receipts.
- **FX Rate Schedules:** Collect documentation on the foreign exchange rates used for conversions, including historical rates and the source of rates.
- **FX Reconciliation:** Obtain reconciliation statements for foreign currency accounts.
- **FX Gain/Loss Reports:** Review reports of foreign exchange gains and losses.
**3.2. **Perform Procedures:**
- **Verify Transactions:** Reconcile foreign currency transactions with supporting documentation and records.
- **Review FX Rates:** Ensure that the foreign exchange rates used for conversions are appropriate and consistent with the source of rates.
- **Check Valuation:** Verify that foreign currency balances are correctly valued at the closing rate and review any adjustments for unrealized gains or losses.
- **Assess Compliance:** Ensure compliance with accounting standards and company policies related to foreign exchange fluctuations.
**3.3. **Documentation and Evidence:**
- **Foreign Exchange Contracts:** Verify that contracts and agreements are properly recorded and reflect the terms of the foreign currency transactions.
- **Rate Schedules:** Check the accuracy of foreign exchange rate schedules and confirm they are updated regularly.
- **Gain/Loss Accounting:** Ensure that gains and losses from foreign exchange are correctly recorded in the financial statements.
### **Summary**
1. **Auditing Debtors:**
- Obtain customer ledgers, invoices, receipts, and reconciliation statements.
- Verify balances, confirm receivables, check aging analysis, review credit policies, and evaluate provisions.
- Ensure proper documentation and evidence of collections and write-offs.
2. **Auditing Creditors:**
- Obtain supplier ledgers, purchase invoices, payment records, and reconciliation statements.
- Verify balances, confirm payables, review aging, check terms, and evaluate provisions.
- Ensure proper documentation and evidence of payments and accruals.
3. **Auditing Foreign Exchange Fluctuations:**
- Obtain records of foreign currency transactions, FX rate schedules, FX reconciliation, and gain/loss reports.
- Verify transactions, review FX rates, check valuation, and assess compliance.
- Ensure proper documentation of contracts, rate schedules, and gain/loss accounting.
By following these steps and ensuring that all necessary documentation and procedures are in place, you can effectively audit debtors, creditors, and foreign exchange fluctuations as part of an internal audit.
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