Accounts receivable/credit & collections audit program

Transcription

1 Description Revision Info Accounts receivable/credit & collections audit program This program was last reviewed/updated on [Click to Insert Date here] Step Audit Procedure Perf d/ Approved By Workpaper Reference I Objectives of the Review Evaluation of compliance with corporate policies and Evaluation of overall efficiency and effectiveness of process internal controls and 3. II. Evaluation of processes and practices against known best practices. Work Program Steps Planning: a) Review known best practices and research the internet. b) Set up binder. c) Develop project plan and determine scope. d) Prepare budget. e) Plan a coordination meeting with Process Owner. 4. f) Obtain Accounts Receivable process/functional overview and expense allocation. Obtain a copy of Accounts Receivable and Credit & Collections policies and Review procedures prior to beginning fieldwork. Draft any questions that may be asked during interviews and while process mapping. Review the following known best practices: Eliminate barriers to payment by offering customers multiple payment options, flexible billing cycles, and incentives to pay early. Create a single point of contact for all incoming customer calls regarding payments and use technology to route the calls to the appropriate service representative or automated activities Electronically receive and post customer payments to the billing system in real-time to Page 1 of 5

2 Step Audit Procedure reduce processing costs and expedite cash flow. Perf d/ Approved By Workpaper Reference Ensure that all employees with customer contact work together to deliver a consistent message to the customer regarding company s credit policies and goals. Use credit scoring to assign the customer a credit rating that will trigger appropriate sales and collections treatment. Continuously update customers credit ratings using a behavioural scoring system which monitors customer payment behavior, usage activity, and total customer account exposure versus assigned credit limits. Use the credit and collections process to enhance customer satisfaction. Develop, monitor, and motivate collections specialists using individual and team performance measures. Use performance measures to select and monitor outside collection agents, if it is costjustified to employ them. Automatically initiate all treatment actions based on a pre-programmed, customized treatment timeline that details specific action steps for the initial identification of delinquent account customers based on customer credit rating/class. Prioritize delinquent accounts for collections follow-up, allocate appropriate collections resources, and provide real-time access to customer information. Page 2 of 5

3 5. 6. Benchmark company accounts receivable process and statistics to other similar companies (if applicable). Based upon the interviews, gain an understanding of the following areas: Overall accounts receivable process Customer credit rating system/scoring process Order entry process (High level review of A/R s role in the order entry process i.e. credit classification, etc.) Process for monitoring of credit standings Reconciliation of shipped items to invoices; G/L reconciliation Invoicing process A/R cash application process Process for collection of overdue amounts Process for writing off over due receivables Management reporting (including process performance metrics) Reserve process (Coordinate with external auditors to determine their process for review the company s reserve values to ensure that there is no duplication of effort). Compare all processes to known best practices (if applicable) to determine any suggestions for process improvements. 7. Obtain an understanding and evidence of the accounts receivable/credit & collection process by performing the following transaction testing: Review the company's A/R trial balance for unusual and/or large items and investigate, if necessary. Items should be > 60 days and > 5% of total A/R balance. Review detail of significant past due balances and discuss with management. Obtain and document the probability of collectability and plans for collection. Verify compliance with existing policies and Page 3 of 5

4 Ensure completeness of recording. Verify customer payments made. Verify accuracy of recording. Review credit due dates aged amount. Verify proper authorizations (if necessary). 8. Select cash receipts. Ensure that all receipts are posted in a timely manner and procedures are in compliance with established policies and Select invoiced transactions. Ensure that invoicing procedures occur in a timely manner are in compliance with established policies and Review credit ratings for 10 customers. Ensure that credit classifications are in alignment with scoring policies. Document all discrepancies. Obtain the list of credit memos issued for the Q49X and Q19Y. Select 10 items and trace to supporting documentation. Ensure that they were issued and approved in line with corporate policy and Obtain an analysis of Allowance for Doubtful Accounts. Verify that the allowance is adequate and has been calculated in line with corporate policy. Review A/R reconciliation to G/L verify timeliness. Review A/R reserved amounts determine method of calculations and verify reasonableness. Review/evaluate management reporting reports/reconciliations (including budget to actual commission expense, target earnings, quotas, etc.) Obtain the following background information: Number and dollar value (absolute) of invoices for the last six months obtain soft copy of information Current aging of the receivables identify high value invoices, credit notes, etc. Numeric sequence (search for duplicates & missing invoices) Receivables by location (i.e. U.S., Europe, Asia, etc.) obtain soft copy of the information Page 4 of 5

5 Percentage of debit/credit memos by location (i.e. U.S., Europe, Asia, etc.) obtain soft copy of the information Match billings to shipping reports for quantities shipped but not billed; matching billing date to shipping date determine the time gap Discuss findings with management prior to drafting audit report. Draft final report in conjunction with process owner. Distribute final report as prescribed by internal audit distribution list. Schedule follow-up as appropriate. Page 5 of 5