Table of Contents
Chapter 1 - Auditing Receivables1
| Auditor Objectives | 1 |
| Auditing Characteristics of Receivables | 2 |
| Receivables Process Flow | 3 |
| Receivable Schemes | 3 |
| Diversion of Collections on Old Receivables | 3 |
| Lapping | 4 |
| Fake Receivables | 4 |
| Fake Notes | 4 |
| Auditing Activities | 4 |
| Risk Assessment | 4 |
| Accounts Receivable Aging Report | 5 |
| Substantive Procedures | 5 |
| Examine Accounts Receivable Aging Report | 6 |
| Inspect and Confirm Notes | 6 |
| Confirm Receivables | 7 |
| Positive Confirmations | 8 |
| Negative Confirmations | 8 |
| Mixed Confirmations | 9 |
| Sample Confirmation | 9 |
| Confirmation Sample Size | 11 |
| Dealing with Discrepancies | 12 |
| Dealing with Nonresponses | 12 |
| Management Refuses to Allow Confirmations | 12 |
| Confirmation of Write-Offs | 13 |
| Review Cutoff | 13 |
| Test Notes Receivable | 13 |
| Fair Value Option | 14 |
| Evaluate Receivables Accounting | 14 |
| Examine Allowance for Credit Losses | 14 |
| Investigate Legal Encumbrances | 15 |
| Search for Related Parties | 15 |
| Conduct Analytical Procedures | 16 |
| Review Presentation | 17 |
| Internal Controls Used by the Client | 18 |
| Advance Work | 20 |
| Review Questions | 21 |
Chapter 2 - The Allowance for Credit Losses22
| Estimation of the Allowance for Credit Losses | 22 |
| Accounting for the Allowance for Credit Losses | 23 |
| The Direct Write-off Method | 24 |
| Review Questions | 26 |
Chapter 3 - Accounting for Notes Receivable27
| Notes Receivable | 27 |
| The Amortization Schedule | 28 |
| Imputed Interest | 29 |
| Review Questions | 32 |
Answers to Chapter Questions33
Glossary36
Index38
Course Details
Author: Steven M. Bragg, CPA
Steven Bragg, CPA, has been the chief financial officer or controller of four companies, as well as a consulting manager at Ernst & Young. He received a master’s degree in finance from Bentley College, an MBA from Babson College, and a Bachelor’s degree in Economics from the University of Maine. He has been a two-time president of the Colorado Mountain Club, and is an avid alpine skier, mountain biker, and certified master diver. Mr. Bragg resides in Centennial, Colorado. He has written more than 300 books and courses, including New Controller Guidebook, GAAP Guidebook, and Payroll Management.
Publication/Revision Date: 9/30/2026
Course Exam Questions (online): 10 (multiple-choice)
Program Delivery Method: NASBA QAS Self-Study
Available Formats of Course Text: PDF or PDF plus printed copy sent in the mail
Course Level, Prerequisites, and Advance Preparation Requirements
| License | Course Level | Prerequisites | Advance Preparation Requirements |
|---|
| CPA | Overview | None | None |
Sponsor ID Numbers
National Registry of CPE Sponsors ID: 107615
State CPA Board Sponsor ID Numbers (where applicable)
Florida Division of Certified Public Accounting: 0004761
Hawaii Board of Public Accountancy: 14003
New York State Board for Public Accountancy: 002146
Ohio Accountancy Board: CPE .51 PSR
Pennsylvania State Board of Accountancy: PX178025
Texas State Board of Public Accountancy: 009349
Learning Objectives
As a result of studying the course material, you should be able to meet the objectives listed below:
- Recognize the characteristics of notes receivable.
- Specify the different types of related parties.
- Cite the types of fraud related to receivables.
- Describe the process of risk assessment used by an auditor.
- Recognize when alternative audit procedures should be used.
- Recognize the substantive procedures used in relation to receivables.
- Describe the contents of a confirmation letter.
- Specify the circumstances under which a negative confirmation could be used.
- Recognize the contents of the allowance for credit losses.
- Specify the proper accounting for a note receivable.
