In some situations, general provision for doubtful debt is offered for accoridng for the age with the outstanding debt. Even so, General provision for doubtful receivable is no longer permitted subsequent for the implementation of IAS 39.

“A financial asset or a group of financial assets is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.”

As such, impairment loss really should be recognized when, subsequent for the initial recognition with the receivable, an event has occurred which causes the receivable to become impaired. General provision offered in accordance with age with the outstanding is no longer permitted. The financial asset really should be impaired if, and only if, there is certainly objective proof of impairment.

Within the existing environment exactly where credit crunch influences are predominant, you will discover escalating credit dangers with the Firm. Together with the enthusiasm to get new clients, the strict credit threat assessments ( of new clients) really should not be compromised.

The company ( that happen to be straight and severely impacted by the credit crunch) really should examine creditworthiness of new clients cautiously. Comprehensive facts necessary to become obtained, as an illustration:

The business can go over together with the new client around the explanation to buy from them, because the supplies client could have already been discontinued from other supplies, resulting from credit threat concern.

Therefore, a comprehensive understanding and suitable approval approach must be undertaken to stop doubtful debt concern.

Appropriate segregation of duties ought to exist through stocktake.

Being an auditor, we will need to observe that the stock take group consist of:

Warehouse personnels will be the those who has direct access for the Company's stocks. Why really should the warehouse personnel (counter) accompanied using a checker through stock take? That is to stop prospective fraud case and observe the standard inventory management procedures with the client. Warehouse personnel will be the those who has day-to-day access for the warehouse. Assuming, they steal one particular and reported a single stock lesser through stock take, no one is not going to recognize the fraud case, unless the inventory method capture the each day movement.

To illustrate with an instance. Corporation XYZ will not has right inventory system that retain track on goods in and goods issued. The Corporation is not going to know the precise quantity with the inventory item, till the physical stock take, which can be performed on a month-to-month basis. The employee could have just steal one particular item and  letting persons recognize.

Therefore, stock take group ought to consist of no less than one particular individuals from other division to verify that the quantity counted and reported is as what have already been counted physically.