As the GYF Assurance & Advisory (A&A) Group begins 2026, our team is preparing to begin final fieldwork for our year‑end audit engagements. This phase of the audit focuses on gathering the evidence needed to support the balances and disclosures presented in the financial statements – ultimately, forming the basis for the audit opinion to be issued in the coming months.
This series of posts is designed to explore and explain the sections that we audit as part of our assurance work. In this article, we’re taking a closer look at accounts receivable (A/R).
Why Do Auditors Focus on Accounts Receivable?
The purpose of an audit is to provide an independent opinion on whether an organization’s financial statements are fairly presented in accordance with the applicable accounting framework (such as U.S. GAAP). A clean, unmodified opinion offers reasonable assurance that the statements are free from material misstatement, whether caused by error or fraud.
This opinion essentially indicates that the financial statements reflect an accurate view of the client’s financial position and results of operations. Because accounts receivable is often a material balance, it plays a significant role in this assessment.
Auditors design procedures to address the risks associated with A/R, with particular focus on two key management assertions:
- Existence/Occurrence – Is the A/R balance overstated? Do the recorded receivables actually exist?
- Completeness – Is the A/R balance understated? Are all valid receivables recorded?
These assertions also tie directly to revenue. Any overstatement or understatement of A/R typically results in a corresponding misstatement of revenue, affecting both the balance sheet and income statement.
How Do Auditors Test Accounts Receivable?
To evaluate the accuracy and reasonableness of the A/R balance, auditors typically perform the following procedures:
- Develop expectations and compare current balances to prior periods or budgets
- Perform analytical procedures and investigate unusual trends or variances
- Obtain and review an A/R aging report, reconciled to the trial balance
- Evaluate the aging for items requiring reclassification (e.g., credit balances, employee receivables, related‑party amounts)
- Send confirmations directly to customers, when appropriate
- Test subsequent cash receipts to verify the existence and collectability of year‑end receivables
- Inquire about any receivables that have been sold, pledged, discounted, or assigned
To complete these procedures, auditors rely on supporting information prepared by the organization, which becomes part of the audit workpapers.
What Information Will the Auditor Request?
To support the audit of accounts receivable, an auditor may request:
- A/R aging reports as of interim and/or year‑end dates
- Customer contact information and approval to send A/R confirmations
- Invoices and payment support (checks, ACH confirmations, etc.) for selected transactions
- A listing of credit memos issued during the audit period and shortly thereafter
- Management’s analysis of the allowance for credit losses and a summary of write‑offs
This information helps auditors address the relevant assertions, perform required procedures, and ultimately form conclusions about the accuracy of the year‑end A/R balance.
Key Takeaways
Auditing accounts receivable is just one component of the broader audit process, but it plays a critical role in supporting the overall audit opinion. Understanding the purpose behind these procedures (and the information the auditors will request) helps ensure a smoother, more efficient audit for everyone involved. Please reach out to GYF to learn more about the audit process or to discuss the needs of your organization.
