Internal Audit Department

Internal Audit Work Program

WP Ref.

Auditable unit: Approved by

Assignment : Date:

WP
Audit Step Preparer Reviewer
ref.
Accounts Receivable (A-G).

A. Gain an understanding of and document the procedures and

controls related to the following:
1. Interview relevant parties to the process.
2. Define terms relevant to accounts receivable.
3. Reserve and chargeback methodologies.
4. Bad Debt write-off policies.
5. A/R timing, completeness, and accuracy issues
6. System access for A/R-related responsibilities
7. Process for handling live checks received at Corporate (storage?, sent to lockbox?,
timeliness of deposit?, authorizations needed?, etc)
B. Accounts Receivable
1. Test a sample of ## cash receipts and ensure timely, accurate posting compliant
with policy. Trace to bank statements and source invoices.
2. Verify timely and accurate reconciliation of A/R sub ledger to General Ledger.
Review most recent two months' month-end reconciliations and select 10 random days
from test period and review.
3. Review aging of customer accounts for balances over 60 days and/or greater than
5% of total AR.
4. Identify high balance customer accounts.
5. Ensure proper segregation of duties within AR function.
C. Credit and Collections
1. Test a sample of ## credit memos issued for proper approval and accuracy of
amount.
2. Obtain customer credit application file and verify adherence to credit approval
policy.
3. Ensure all uncollected balances are identified and adequately explained.
4. Review payment discrepancies (short-paid invoices) for unusual amounts or
activity.

D. Reserves and Chargeback

1. Recalculate reserve balance per policy.
2. Review chargebacks for reasonableness.
 D. Overdue Accounts and Bad Debt Policy

1. Test a sample of ## bad debt write-offs for proper approval and adherence to
policy.
2. Review all write-offs for any unusual amounts or suspicious activity.
3. Test overdue accounts for collection of interest/penalties.

E. AR Fraud Testing
1. Test for Lapping Cash
- look for large changes in A/R turnover by customer, compare this year to last
year.
- confirm major customer A/R balances
- Search for all customers with equal credits and debit adjustments to their
account. The credit would be for an old invoice and the debit would be to record
a new invoice.
2. Test for Fraudulent Adjustments
- compare write-off this year to last year by customer
- Search for duplicate cash receipts that were later credited. Ensure these
refunds were sent to the customer
- Extract all round dollar adjustments and review the relative number of round
dollar adjustments.
G. Customer Master File
1. Obtain list of employees with ERP system access to customer master file.
2. Test a sample of ## customers for consistency of credit limit in system with
approved amount.
3. Trace sampled customer data to current sales contract and ensure consistency of
terms, etc.

H. Unapplied Cash
Obtain file of unapplied cash. Analyze the file for age in total and by customer.
Inquire with business owner on significantly aged items.
I. Live Check Testing
Obtain the live check log. Review