Checklist for Audit of Debtors, Loans, and Advances

Debtors represent the amounts due to an entity for goods sold or services rendered or in respect of other similar contractual obligations, but do not include the amounts which are in the nature of loans or advances. Loans represent the claims of an entity in respect of such contractual obligations as the money lent. Advances represent payments made on account of, but before completion of, a contract or before acquisition of goods or receipt of services.

One may adopt the following checklist for Audit of Debtors, Loans, and Advances:

1. Has the system of internal control relating to debtors, loans and advances been evaluated?

• • Basis for determination of credit limits for customers
  • Procedure for preparation of aging schedule of debtors at regular intervals
  • System of obtaining balance confirmations
  • System for approval of the competent authority
  • System of periodic reconciliation of various debtor balances with related control accounts

2. Whether the verification of the large balances due for a long time, has been done?

3. Are the balances reported in the financial statements completely recognized?

4. Is the appropriate valuation done for recognizing the debtors, loans, and advances?

Click Here To Read The Full Story