Document ID: chunk:federal_register_of_legislation:F2022C01208:reg:14:p40
Version: federal_register_of_legislation:F2022C01208
Segment Type: reg
Provision Reference: reg 14 (pt 40/57)
Character Range: 120242–123377

been consistently and appropriately applied.

  15.   Obtain a schedule of receivables and determine whether the total agrees with the trial balance.

  16.   Obtain and consider explanations of significant variations in account balances from previous periods or from those anticipated.

  17.   Obtain an aged analysis of the trade receivables.  Enquire about the reason for unusually large accounts, credit balances on accounts or any other unusual balances and enquire about the collectability of receivables.

  18.   Consider, with management, the classification of receivables, including non‑current balances, net credit balances and amounts due from shareholders, those charged with governance and other related parties in the financial report.

  19.   Enquire about the method for identifying "slow payment" accounts and setting allowances for doubtful accounts and consider it for reasonableness.

  20.   Enquire whether receivables have been pledged, factored or discounted and determine whether they have been properly accounted for.

  21.   Enquire about procedures applied to ensure that a proper cut‑off of sales transactions and sales returns has been achieved.

  22.   Enquire whether accounts represent goods shipped on consignment and, if so, whether adjustments have been made to reverse these transactions and include the goods in inventory.

  23.   Enquire whether any large credits relating to recorded income have been issued after the balance sheet reporting date and whether provision has been made for such amounts.  Consider the reasonableness of any provisions.

Inventories

  24.   Obtain the inventory list and determine whether:

      1. the total agrees with the balance in the trial balance; and

      2. the list is based on a physical count of inventory.

   1. Enquire about the method for counting inventory.

   2. Where a physical count was not carried out on the balance sheet date, enquire whether:

          1. a perpetual inventory system is used and whether periodic comparisons are made with actual quantities on hand; and

          2. an integrated cost system is used and whether it has produced reliable information in the past.

   3. Consider adjustments made resulting from the last physical inventory count.

   4. Enquire about procedures applied to control cut‑off and any inventory movements.

   5. Enquire about the basis used in valuing each inventory classification and, in particular, regarding the elimination of inter‑branch profits.  Enquire whether inventory is valued at the lower of cost and net realisable value (or lower of cost and replacement cost for not‑for‑profit organisations).

   6. Consider the consistency with which inventory valuation methods have been applied, including factors such as material, labour and overhead.

   7. Compare amounts of major inventory categories with those of prior periods and with those anticipated for the current period.  Enquire about major fluctuations and differences.

   8. Compare inventory turnover with that in previous periods.

   9. Enquire about the method used for identifying slow moving and obsolete