Audit: testing receivables
Your first audit section: pick the balances to test, check after-date cash, test sales cut-off and report back.
ACCA exams this helps with: AA Audit and Assurance See the ACCA map
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Receivables testing is one of the first sections new audit associates are given. You check that the money customers owe the client is real (existence), recorded in the right year (cut-off) and likely to be paid (valuation). The work is mostly comparing the client’s listing with independent evidence, such as bank statements and delivery notes.
Example. A customer owed £10,000 at the year end and paid £10,000 in April. That payment is good evidence the debt was real.
Key words
- Existence
- The audit check that an asset or balance in the accounts is real.Example: The auditor finds stock listed on the count sheet on the warehouse shelf. That tests existence.
- After-date cash
- Money a customer pays after the year end for a debt they owed at the year end. Auditors use it as evidence that the debt was real.Example: A customer owed £10,000 on 31 March and paid £10,000 on 18 April. The payment shows the debt existed.
- Cut-off
- Making sure each transaction is recorded in the correct year, especially transactions close to the year end.Example: Goods sent to a customer on 31 March belong in the year ending 31 March, even if the invoice is dated 2 April.
- Exception
- In an audit, an item where the evidence does not match the client’s records. Each exception needs to be investigated.Example: An employee who left in January is still being paid. That is an exception.
- Proposed adjustment
- A correction the auditor asks the client to make to its accounts, usually as a journal entry.Example: Dr Sales £20,000, Cr Trade receivables £20,000 to move a sale into the correct year.
Your brief and documents
You are a first-year audit associate. The client is Harbour & Hale Coffee Roasters Ltd, a wholesale coffee supplier (a fictional company). The year end is 31 March 2026, and fieldwork is in May.
Hi,
Welcome to the team. Please can you take the trade receivables section? The balance at 31 March is £412,600.
Materiality is £24,000 and performance materiality is £18,000. Please test every balance over £15,000 in full; I’ll give you a sample of the rest later.
- Pick out the balances to test.
- Check them against cash received after the year end.
- Do the sales cut-off test on the despatch notes I’ve attached.
- Send me a short summary of what you found.
Shout if anything looks odd. Thanks, Sam
Document 1: Aged receivables listing at 31 March 2026
| Customer | Balance £ | Current £ | 31–90 days £ | Over 90 days £ |
|---|---|---|---|---|
| Brewline Cafés Ltd | 48,200 | 48,200 | – | – |
| Northgate Hotels plc | 36,750 | 30,000 | 6,750 | – |
| Olive & Oak Deli | 3,900 | 3,900 | – | – |
| Station Kiosk Co | 12,480 | 12,480 | – | – |
| Greenleaf Grocers | 22,300 | 22,300 | – | – |
| Parkside University Catering | 61,400 | 61,400 | – | – |
| The Daily Grind | 8,150 | – | – | 8,150 |
| Cornerstone Offices | 17,900 | 17,900 | – | – |
| Harbour Market Stalls | 2,640 | 2,640 | – | – |
| 52 other customers | 198,880 | 181,300 | 17,580 | – |
| Total | 412,600 |
Document 2: Cash received after the year end (from bank statements, April–May 2026)
| Customer | Date received | Amount £ | Notes |
|---|---|---|---|
| Brewline Cafés Ltd | 18 April | 48,200 | Remittance lists all March invoices |
| Northgate Hotels plc | 22 April | 30,000 | Customer email: remaining £6,750 on hold, goods arrived damaged |
| Greenleaf Grocers | 9 April | 22,300 | Full balance |
| Parkside University Catering | 30 April | 41,400 | Remittance excludes invoice INV-2291 (£20,000) |
| Cornerstone Offices | 12 May | 17,900 | Full balance |
Document 3: Sales cut-off, despatch notes either side of the year end
| Despatch note | Goods sent | Invoice | Invoice date | Amount £ | Recorded in |
|---|---|---|---|---|---|
| DN-4410 | 29 March | INV-2288 | 29 March | 5,600 | Year to 31 March 2026 |
| DN-4411 | 30 March | INV-2289 | 31 March | 3,250 | Year to 31 March 2026 |
| DN-4412 | 31 March | INV-2290 | 2 April | 7,400 | Year to 31 March 2027 |
| DN-4413 | 2 April | INV-2291 | 28 March | 20,000 | Year to 31 March 2026 |
| DN-4414 | 3 April | INV-2292 | 3 April | 4,100 | Year to 31 March 2027 |
Watch it explained
Press play to watch the animation, or step through it at your own pace with the arrows.
Videos from YouTube tutors
These videos are made by independent tutors on YouTube, not by Trial Balance. Some use US terms or older exam names (for example F7 for FR), but the principles are the same.
How a senior would approach it
- Read the brief twice. Note the thresholds (test over £15,000; performance materiality £18,000) before touching the documents.
- Work from the listing. Highlight the balances you will test and work out how much of the total they cover. Seniors like to see coverage as a percentage.
- After-date cash is strong evidence of existence. If a customer paid after the year end, the debt was real. Anything unpaid needs another test, such as checking the invoice and the signed delivery note.
- For cut-off, the despatch date decides the period. Revenue belongs in the year the goods were sent, not the year the invoice was dated.
- Flag, don’t fix. The client corrects its own accounts. Your job is to quantify each error, record it and propose an adjustment.
- Look beyond the task. The aged listing shows other risks, such as old balances that may never be paid. Mention them even if nobody asked.
Your tasks
Work through the tasks in order, using the documents in your brief. Each task is checked when you press Check answer.