i) Trade Creditors
• Obtain a schedule of the trade creditors with appropriate age analysis and check this with the control account of the creditors ledger.
• Review the individual accounts with the largest through put of transactions during the period.
• Debit and credit balances should be separated; debit balances should be included in debtors (grossing up(.
• Review the year-end cut-off procedures for purchases.
• Review the internal control over the purchases system which ensures that all goods received are properly recognized as liabilities of the entity.
• On testing individual balances that are suspicious, consider:
Is the balance made up of specific items outstanding within a reasonable period?
Have all the items been authorized for payment?
Can the amount be reconciled with creditors statement?
• Perform analytical procedures on creditors, comparing age analysis with previous periods and creditors days.
ii) Specific provision for bad and doubtful debts
• For customers who are considered potential risks (hence provision made) review previous experiences with the particular debtor.
• To justify the specific provision, the debtor must exist, hence auditor should send debtors‘ circulirasion to the respective debtor(s).
• Carry out an age analysis for all debtors. Specific provision is made for long- standing debts.
• Review post balance sheet events to verify whether debtor paid hence need to cancel the provision earlier made.
• Check authority for making the provisions (specific)
• For debts considered risky, review the respective individual accounts of the customers and those that appear irregular by nature, composition or size of the balances or transactions therein.
