It is important to carry out the Tests of Controls for checking effectiveness of internal control over sales as a part of the debtors' audit…

It is important to carry out Tests of Controls for checking the effectiveness of internal control over sales as a part of the debtors' audit procedure. Following points need to be considered in respect of trade receivables: Only bona fide sales lead to trade receivables.All such sales are made to approved customers.All such sales are properly recorded in the books of accounts.Once recorded, the debtors can be settled only by receipt of cash or on the authority of a responsible official.Segregation of duties at every point in sales transaction. (accounting for debtors, collecting the payments, sending reminders etc.)Debtors are collected on time.In case debtors are not collected in time, sending reminders and taking legal actions if required.Balances are regularly reviewed.A proper system of follow up exists and if necessary, adequate provision for bad debt should be made by preparing adequate ageing schedule of the debtors.