Joanna A. van der Vant has worked in accounts receivable for SOL Property Management since 2010. During this time, she’s practiced sound financial procedures, always keeping in mind that an audit could be just around the corner. Below, Joanna A. van der Vant explains some of the things she’s learned over her years of experience in real estate and accounting.
Q: You describe eight audit objectives. Could you tell us what those are?
Joanna A. van der Vant: An auditor must go through a series of balance-related audit objectives. For one, the auditor must verify that the accounts receivable balance agrees with the ledger.
Q: What else does an auditor verify?
Joanna A. van der Vant: An auditor must check for existence, completeness, accuracy, classification, cutoff, realizable value, and rights of accounts receivable.
Q: When an auditor identifies the client business risks where accounts receivable is affected, what does this involve?
Joanna A. van der Vant: The auditor must first get a basic understanding of the client’s business and industry in order to determine real risks that must be addressed by accounts receivable procedures.
Q: How does the industry impact risk?
Joanna A. van der Vant: An example would be the economic environment for a particular industry. Because of this, the auditor may increase risk.
Q: What does an auditor evaluate in the sales and collection cycle?
Joanna A. van der Vant: There are three primary aspects an auditor evaluates: prevention and detection of embezzlement, controls over cutoff, and controls regarding uncollectible accounts.
Q: Does an auditor only look at accounts receivable?
Joanna A. van der Vant: No, auditors generally look at the entire sales and collection cycle due to the fact that income statements are so closely tied to balance sheet accounts.
Q: What types of things qualify as “red flags” in the sales and collection cycle?
Joanna A. van der Vant: A wide variety of things, but an auditor will look for things that stand out, like large and unusual amounts that show up in accounts receivable. Large balances and outstanding accounts that have been awaiting payment for extremely long periods of time are especially noticeable.
Q: Does this automatically result in an audit finding?
Joanna A. van der Vant: No, when an auditor notices especially unusual fluctuations, that auditor should first contact management to determine if there might be an explanation.
Q: Can the manager’s response always be trusted?
Joanna A. van der Vant: It is up to the auditor to evaluate the manager’s answers and ask additional questions if the answers aren’t reasonably satisfactory.
Q: What is a “cutoff misstatement?”
Joanna A. van der Vant: Cutoffs come into play when an auditor notices that transactions are listed before the cutoff date. Improperly listed transactions could impact a period’s income, so it’s often an area targeted by auditors.
Joanna A. van der Vant obtained her MBA in Marketing and Management in Warsaw, Poland. A Certified Public Accountant, Joanna A. van der Vant is currently pursuing her CPA. Joanna van der Vant lives in Chicago.