Auditing Daily Accounts Receivable Activity (Daily Closing Procedures)
These procedures are performed in order to audit AR data integrity and to confirm that all transactions entered during the day have been correctly posted to the general ledger. These procedures must be performed at the end of the day, or at the beginning the next day, after all cash receipts processing and invoicing activity for the date being balanced have been completed, and before any payment processing or invoicing activity for the next day has been processed. To audit accounts receivable activity, you must perform two major steps. These are.
• Proving that the beginning sub-ledger balance (total of all open invoices) plus the net accounts receivable activity for the current day equals the ending sub-ledger balance for the day. This process is referred to as balancing the sub-ledger.
• Proving that the ending sub-ledger balance equal the accounts receivable control account balance in the general ledger. This process is referred to as balancing the control account. The Accounts Receivable System posts all accounts receivable payment and adjustment activity to the General Ledger on an on-line basis, so the accounts receivable sub-ledger balance should differ from the control account balance in the general ledger only by the amount of any un posted sales (invoices). By producing a report with a valid cut-off and comparing the report balance to the balance in the general ledger control account at the proper time, you may verify that all accounts receivable transactions are being correctly transferred to the general ledger.
The auditing procedures listed here may be performed at the end of each day after all activity for the day has been processed, or the following morning, if a valid sub-ledger report is run at the end of the prior day. Note: The sub-ledger report used for the balancing procedure must be produced after all AR payment, adjustment and invoicing activity for the day have been processed, and before any payment activity is processed for the next day.
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Balancing the AR Sub-ledger