What it is
Receivables are carried at the amount expected to be collected, which makes the allowance an accounting estimate (AU-C 540) and the aging the data behind it. The audit tests that the aging is complete and agrees to the ledger, that old balances are collectible and that the loss rates are supported.
This workbook takes the aging by customer in six buckets, separates customers evaluated individually with a specific reserve, applies loss rates by bucket with an adjustment for current conditions and forecasts, compares the result with the recorded allowance, and rolls the allowance forward. It tracks subsequent receipts, credit balances and concentration.
When to use it
- Testing the valuation of trade receivables on an audit.
- Documenting the allowance estimate under the aging approach.
- Reviewing concentration, credit balances and subsequent collections.
What’s inside
- Aging by customer with credit balance and subsequent receipt tracking
- Pooled allowance by bucket with historical rates and adjustments
- Specific reserves for customers evaluated individually
- Allowance rollforward, GL tie-out and concentration of the largest balances
Standard cited
This template follows ASC 326-20 / AU-C 540. It is written in our own words, except for phrases the standard requires the document to contain, with [bracketed placeholders] for client details, amounts in USD and dates as MM/DD/YYYY. Check it against the current standard and your firm’s methodology before use. See AU-C 540 explained.
Questions
Does this implement CECL?
It supports the common aging (loss-rate) approach to estimating expected credit losses under ASC 326-20 for trade receivables. For fiscal years beginning after December 15, 2025, ASU 2025-05 also lets an entity assume current conditions stay unchanged when forecasting for current receivables and contract assets; if the entity elects it, document the election and enter a zero adjustment. The workbook pools by risk characteristic, applies rates from history adjusted for current conditions and reasonable and supportable forecasts, and evaluates individually the receivables that do not share risk characteristics. Entities using other methods will adapt it.
Where do the loss rates come from?
From the entity’s write-off history by aging bucket over a period that covers a credit cycle, adjusted for current conditions and forecasts. The auditor tests the data, the method and the adjustments, and looks for bias in how rates were set.
What do subsequent receipts prove?
Cash received after the aging date supports both existence and collectibility. Balances still open after a reasonable period, or paid in unusual ways or by related parties, need further work.
Related templates
- Audit Program: Accounts Receivable and Revenue
- Accounts Receivable Confirmation Letter (Positive)
- Confirmation Control Log (AU-C 505)
- Monetary Unit Sampling Workpaper (MUS)
Last updated 11/05/2026. All free templates.