BDO ZIMBABWE

Audit programme

DEBTORS I1

Company……………………………………………………………

Year end…………………………………………………………….

General
The objectives of this programme is to test debtors for overstatement and provisions (for
doubtful/bad debts) for understatement. The programme is only a guideline and the auditor should
use his or her own initiative in preparing additional programmes that may be necessary to achieve
the broad objectives above. Overstatement of debtors emanates from the following:

 Orders accepted from credit risky customers

 Debtors ageing incorrectly compiled, potentially uncollectible amounts not recognised
 Un-invoiced deliveries (if stock and cost of sales based on invoicing, may result in overstated
stock)
 Revenues misclassified or not recognised; debtors not recorded
 Revenues recorded at wrong amounts
 Revenues recorded in wrong periods for example to smooth earnings reports.
 Credits issued for returns or allowances not earned.
 Revenues suppressed to reduce taxes or royalties.
 Invoicing recorded but goods not shipped or services not rendered at all or not until the
following period.
 Revenue recorded even though there are significant contingencies.
 Revenues and trade debtors overstated to (1) improve performance picture, (2) meet sales
forecast, or (3) increase commission, bonus, or profit sharing.
 Returns or other allowances misclassified or not recorded.
 Invoicing recorded at less than full amount; customers remit in full and difference
misappropriated.

Therefore, the following procedures are designed to address the above issues:

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BDO ZIMBABWE
Audit programme

DEBTORS I 1-1

Company……………………………………………………………

Year end…………………………………………………………….

Current year amounts

Description Preliminary Adjustments Final Amount Prior year

Trade debtors

Loans

Prepayments

Staff debtors

Other debtors

Total debtors

Provisions

Net debtors

Conclusion
Based on our examination of trade debtors and other debtors:
n Trade debtors are fairly stated.
n The provision for doubtful debts is fair and reasonable
n Other debtors are fairly stated.
n Group balances, directors’ loans and long term debtors have been correctly classified on the
schedules.

Prepared by………………..…………………………Date……………………………….

Reviewed by……………………………..………..…Date……………………………….

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BDO ZIMBABWE
Audit programme

DEBTORS I 1-2
General

Company……………………………………………………………

Year end…………………………………………………………….

Performed Reference to Symbol

by Working papers (legend)

1. Agree opening and closing balances with

general ledger

2. Agree prior year figures with working papers

or accounting package

3. Review debtors listing and obtain explanations

for major fluctuations with prior year.
Obtain an aged listing of trade debtors and:
 Check arithmetical accuracy
 Agree to trade debtors listing.
 Check the accuracy of ageing by comparing
individual items to supporting documentation.
 Carry out analytical reviews per I2-1/2

4. Reconcile the trade debtors year end listing to

the general ledger and:
 Obtain explanations for any large or unusual
reconciling items
 Verify these explanations.

5. Ensure the following amounts are recorded

separately in working papers and reclassified
where necessary:
(a) Group company and branch balances

(b) Directors’ and officers’ loan balances

(c) Credit balances

6. Where debtors are secured, record particulars

of such security and ensure that it is adequate.

7. Make notes of report items

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BDO ZIMBABWE
Audit programme

DEBTORS I 1-3

Company……………………………………………………………

Year end…………………………………………………………….

Yes No
8. Have you satisfied yourself through the work performed that the following
audit objectives have been met?
 Completeness: Recorded debtors represent all amounts in this and
prior periods not yet paid by customers
 Existence : Recorded debtors represent amounts for which the
Customers are liable
 Accuracy : Recorded debtors are appropriately recorded by
amount and account in the underlying financial records
 Valuation : Appropriate adjustments are made to recorded debtors
for amounts which are not expected to be recoverable
and for changes in foreign exchange rates.
 Presentation : Debtors are properly classified, described and
disclosed in accordance with applicable accounting
principles and legal requirements

CONCLUSION

Based on work done, debtors are fairly stated and the provision for doubtful debts is accurate.

Completed by: ……………………………………. Date: ……………………………

Reviewed by : …………………………………..... Date: ……………………………

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BDO ZIMBABWE
Audit programme

DEBTORS I 2-1
Analytic review

Company……………………………………………………………

Year end…………………………………………………………….

1. AEGING
Current Prior Previous
$ % $ % $ %
0 - 30 days
31-60 days
61-90 days
91-120 days
Over 120 days

Totals

2. RECENT CREDIT SALES

Most recent month

Prior month
Previous month

3. AVERAGE DAYS O/S

Days outstanding

4. SUBSEQUENT RECEIPTS

Month
Month

5. NUMBER OF ACCOUNTS

Approximate number of
debtors accounts

6. CREDIT BALANCES
Total approximate number of
credit accounts

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BDO ZIMBABWE
Audit programme

DEBTORS I 2-2
Analytic review

Company……………………………………………………………

Year end…………………………………………………………….

CREDIT NOTES ISSUED Current Prior

Month before year end

Year end month

Subsequent to year end

Month
Month

PROVISION FOR DOUBTFUL DEBTS

Current Prior Previous

Provision for doubtful debts

Provision as a % of debtors
Bad debts written off
Bad debts recovered

Net cost of bad debts

Net cost as a % of debtors

REVIEW PROGRAMME

Performed by

Review information on I2-1 and I2-2 and investigate unusual trends or variations . Record and
substantiate explanations.

Prepared by: ……………………………………. Date: ………………………………..

Reviewed by: …………………………………... Date: ……………………………….

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BDO ZIMBABWE
Audit programme

DEBTORS I 3-1
Circularisation

Company……………………………………………………………

Year end…………………………………………………………….
Performed Reference to Symbol
By Working paper(s)
1. Soon after the end of the financial year,
prepare positive confirmation requests and
post them together with business reply paid
envelopes and the company’s statement as
follows:
1.1 Select accounts from the debtors listing for
circularization, using statistical sampling if
appropriate. Record selected accounts on
I3-2
1.2 Consider whether any additional accounts are
to be circularized (record reasons)
1.3 Cast debtors listing, reconcile to general
ledger control and examine material
reconciling items
1.4 Prepare and send positive confirmation requests
(send second requests after 2 weeks)

2 At final audit perform the following

procedures on all accounts circularized:
2.1 Agree replies to schedule I3-2
2.2 Investigate exceptions to replies
2.3 Carry out alternative procedures for non
replies
Verify payment to deposit slip or obtain
telephone confirmation, e-mail, or inspect
proof of delivery and customer orders.
2.4 Consider to what extent queries raised by the
circularization arte indicative of potential
problems in other areas such as:
 Cut off
 Valuation of stock
 Rolling of cash

CONCLUSION
Based on our examination, trade debtors are fairly stated at the confirmation date
Prepared by: ……………………………………. Date: ………………………………..
Reviewed by: …………………………………... Date: ……………………………….

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BDO ZIMBABWE
Audit programme

TRADE DEBTORS I 4-1

Cut off tests

Company……………………………………………………………

Year end…………………………………………………………….

Document Cut off date Last document numbers

Sales invoice
Receipts
Credit notes
Performed by Reference

1 SALES (Invoice)
1.1 Select 5 large invoices from each of the working days
immediately preceding cut-off date and after cut-off
date

1.2 Select 5 invoices with serial numbers immediately

preceding and after the cut off invoice
1.3 Record invoice number, invoice date amount and
debtor
1.4 Check the following:- Date of dispatch
- Date entered in stock records
- Month entered on debtors stmt

2 RECEIPTS
2.1 Check 5 receipts from each of the banking days:
- on or preceding cut off date
- after cut off date
2.2 Check 5 receipts with serial numbers immediately
preceding and after cut-off receipt.
2.3 Record name, amount, date of deposit slip, date of
bank stamp.
Check month entered on debtors statement

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BDO ZIMBABWE
Audit programme

TRADE DEBTORS I 4-2

Cut off tests

Company……………………………………………………………

Year end…………………………………………………………….

Performed by Reference
3 CREDIT NOTES
3.1 Select two large credit notes:
- Preceding cut off number
- After cut off number
3.2 Record name, amount, date, credit note number, year to
which credit note relates and reason for issue.
3.3 Check date goods returned

3.4 Check for proper authorization

3.5 Check month entered on debtors statement

CONCLUSION

Based on our examination:

Prepared by: ……………………………………. Date: ………………………………..

Reviewed by: …………………………………... Date: ……………………………….

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BDO ZIMBABWE
Audit programme

PROVISION FOR I 5-1

DOUBTFUL DEBTS

Company……………………………………………………………
Year end…………………………………………………………….
Current Prior
Provision at the beginning of the year
Movements

Provision at the end of the year

PERFORMED BY REFERENCE
1. Enquire into basis for calculating doubtful debt provision
and comment on:
The adequacy of the company’s work in this connection
Whether a consistent basis has been used.
2. Examine debtors accounts that are both over 60 days and
outside normal credit terms, list material amounts and:
Review performance with credit controller
Assess provision required if any
Consider necessity for provision on accounts not examined.
3. Where provisions are examined at confirmation date, review
debtors accounts, and age analyses at year end. State your
conclusions
4. Examine 2 to 5 of the amounts written off in the current
year: Review correspondence files to ensure adequate
efforts were made to collect the debtors
5. Establish whether bad debt recoveries appear reasonable
through:
Review of bad debt history statistics
Review of correspondence with attorneys
6. Review credit notes issued subsequent to balance sheet.
Ensure that provision has been made for credits relating to
year under review.
7. Review provision for discounts and other allowances.
Review basis of calculation
Review adequacy of prior year provision by reference to
subsequent discount or other expense.
8. Make note of report items

CONCLUSION
Based on work done we are satisfied that adequate provision has been made for doubtful debts
Prepared by: ……………………………………. Date: ………………………………..
Reviewed by: …………………………………... Date: ……………………………….

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BDO ZIMBABWE
Audit programme

OTHER DEBTORS, I 6-1

LOANS AND
PREPAYMENTS

Company……………………………………………………………

Year end…………………………………………………………….

Current Prior
Preliminary Adjustments Final

The above items are examined in terms of the programme on I6-2

Consider preparing a “carry forward” working paper describing the nature and purpose of any
unusual other debtor and prepayment accounts which the company uses regularly.

Prepared by: ……………………………………. Date: ………………………………..

Reviewed by: …………………………………... Date: ……………………………….

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BDO ZIMBABWE
Audit programme

OTHER DEBTORS, I 6-2

LOANS AND
PREPAYMENTS
Company……………………………………………………………

Year end…………………………………………………………….

PERFORMED BY REFERENCE
1. Agree balances with general ledger
2. Investigate and explain significant differences between
current and prior year amounts and record explanations in
the working papers.
Compare with earlier years if appropriate
3 Select significant loan accounts and:
3.1 Obtain direct confirmation
3.2 Examine authority for staff loans
3.3 Inspect any security or other documentation and
record details in the working papers; consider the
adequacy of the security and state you conclusions
3.4 Ensure that required payments have been timely made
3.5 Determine whether interest receivable has been
charged and accounted for at year end and also that the
employee has been taxed on any soft loan benefit
4 Select other significant or unusual accounts and:
4.1 Determine reasonableness of cost or carrying amount
of such items by;
- confirmation or examination of supporting
documentation
- reference to prior period working papers
- physical inspection if appropriate
4.2 Determine whether carrying amount is recoverable in
future periods
4.3 Review amortization policies, rates and methods for
reasonableness and consistency with prior periods
5 For all items, ensure correct classification as current or non-
current
6 Make note of report items

CONCLUSION
Based on our examination: Other debtors, loans and prepayments are fairly stated
Prepared by: ……………………………………. Date: ………………………………..
Reviewed by: …………………………………... Date: ……………………………….

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