How does the auditor test accounts receivable?
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Key procedures:
- Existence: send positive confirmations to debtors; test subsequent cash receipts
- Completeness: trace sales from shipping documents to sales journal
- Valuation: evaluate allowance for doubtful accounts, review aging schedule, assess collectibility
- Rights: review factoring or assignment agreements
- Cutoff: test transactions near year-end to verify correct period recording
- Presentation: verify proper classification (trade vs. related party)
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