The auditor should examine the following while auditing Collection from debtors.
1. Copies of sales invoice.
2. Statement of accounts received from debtors.
3. The counterfoils of receipts.
4. Correspondence with the debtor.
Role of Auditor in vouching collection from debtors
1. The auditor should verify whether all the receipts are deposited into the bank in the immediate following day.
2. He should ensure that the discounts given are at uniform rate to all debtors and that due authorization is obtained in case of higher discounts.
3. If a customer becomes insolvent, the amount due from him can be claimed through his Official Receiver. If possible, a part of the total amount due can be recovered in installments (dividends). The auditor can verify the same by examining the correspondence with the official receiver and the statement received from him.
4. If the debtors have not sent their statement of accounts, the auditor can contact the customers directly and ask for their confirmation of balance.
Types of frauds in collection from debtors
Two types of frauds may be committed while making collection from debtors. They are—
1. Teeming and lading: Where the amount collected from one customer is misappropriated by the cashier and the customer account is adjusted with the amount collected from some other customer. Such adjustments can be made for a longer period if the internal control systems is ineffective.
2. Amount collected from the customer: The amount collected from the customer may be misappropriated and the amount standing to the debit of the customer account is written off as bad debts. The auditor should be very careful while auditing the receipts from the customers to ensure that no fraud of the above nature is committed.
Vouching of Rent Receipts
An auditor has to verify the following documents while auditing rent receipts:
1. Rent Agreements
2. Counterfoils of Rent Receipts
3. Lease deeds
4. Rent rolls
5. Correspondence with the tenants.
Through the lease deeds and rent agreements, the auditor can gather details regarding the exact amount of rent, the amount to be collected towards amenities, the advance collected from the tenant, due date of payment of rent for every month etc.
Role of auditor in vouching rent receipts
1. Cross verifying the counterfoils and rent receipts with rent rolls.
2. Verifying that entries are made in the cash book immediately and everyday collections are deposited into the bank the next day.
3. If rents are collected through agents, their statements should also be verified and tallied with the cash book entries.
4. As there is a possibility that the rent collected may be misappropriated and shown as ‘Rent Receivable’, the auditor should obtain a confirmation statement from the tenant to verify the above.