Accounts Receivable: Five Assertions That Matter

A real receivable can still be misstated

An invoice may be genuine and the customer may acknowledge it, yet the balance can still be wrong. An effective receivables review asks separate questions about the balance, the transaction and the accounting treatment.

1. Existence — is the recorded balance real?

Connect the ledger item to a valid transaction and the relevant date. Customer confirmation or other supporting procedures may help, but investigate exceptions and consider what each procedure actually proves.

2. Completeness — is anything missing?

Reconcile subledger and general ledger, then examine the path from source activity into accounting records. Starting only from recorded invoices may miss transactions that never reached the ledger.

3. Rights — does the entity hold the claim?

Understand the contractual counterparty and any assignment, factoring, security or other arrangement affecting the claim. The customer name in an aging report is not enough to settle ownership or disclosure questions.

4. Valuation — is the carrying amount supportable?

Look beyond aging buckets. Disputes, credit notes, collection experience and subsequent events may affect assessment. Apply the relevant financial-reporting framework rather than a convenient flat provision rate. An existing balance is not automatically a recoverable balance.

5. Cutoff — is it in the correct period?

Inspect activity and adjustments around period-end against contractual terms and the applicable recognition policy. An invoice date alone may not establish when the underlying transaction belongs in the accounts.

Consider a hypothetical customer who confirms an overdue invoice but disputes a pricing adjustment. The confirmation may support part of the existence question; it does not resolve valuation, rights or period recognition by itself. Match each conclusion to the evidence obtained.

These are five practical audit lenses, not an exhaustive official assertion taxonomy. Presentation, classification and disclosures must also be considered. PCAOB AS 1105 is a US audit-methodology reference; the entity's applicable accounting and audit framework determines the obligations.

Beyond the numbers. Inside the business.