As the junior auditor for a regional audit/assurance services firm, you have been tasked with auditing the Accounts
Receivable process for a mid-size retail company. The Accounts Receivable process covers payment processing and
monitoring of outstanding receivable balances.
1. Please read the attached Narrative – Accounts Receivable.
2. The Lead Auditor has asked you to conduct re-performance testing which requires you to manually execute the
control, such as re-performing a calculation that a system automatically calculates. Below are the following
transactions that occurred during the audit period:
Date Transactions
March 14, 2019 Received 75% of the $20,000 balance owed by Webb Co., a bankrupt
business. Wrote off remainder as uncollectible.
April 20, 2019 Reinstated the account of Zorn Co., which had been written off in the
preceding year as uncollectible. Received $5,225 cash as full payment
of Zorn’s account.
May 27, 2019 Wrote off the $2,500 balance owed by Schmich Inc., which had no
assets.
June 30, 2019 Based on an analysis of Accounts Receivable, it is determined that
$11,500 will become uncollectible. The balance in Allowance for
Doubtful Accounts on December 31 prior to adjustment is $200.
 Prepare the necessary T-Accounts for the transactions.
 Determine balance in Allowance for Doubtful Accounts after adjustments.
 Determine the Net Realizable Value of Accounts Receivable if the balance of the Accounts Receivable is $62,000.
 Redo the entry for 06/30 if the percent of sales method had been used to estimate uncollectible accounts
expense at the rate of ½ of 1% of net sales of $2,000,000.
3. Based on the attached Narrative – Accounts Receivable please answer the following questions:
A. What are management’s objectives for Accounts Receivable?
B. What are the inherent risks for Accounts Receivable?
C. What are the key controls within the Accounts Receivable process?
4. Prepare a flow chart for the Property/Ownership Setup & Maintenance – identify the key processes, risks and controls
for Accounts Receivable process. **Flowchart can be handwritten or prepared using Word, Excel, PowerPoint and/or Visio