The main assets, on which Banks base as a guaranty for granting business credit,
are usually inventory, customers' debt and fixed assets. But...
• How do the banks check the collateral it holds?
• Who checks that the assets recorded in the customer's books do exist?
• Who checks that the value of the assets as it appears in the books does indeed reflect its economic value?
• How is it possible to reduce the credit risk of the bank?
As part of the field audit, specific items in the financial statements are reviewed,
in order to examine the existence and economic value of the item under review.
Our experience teaches us that it is most recommended conducting a field audit, for companies where:
• There is a large gap between the current ratio and the quick ratio
• Significant inventory/customers balance
• Inventory/customers turnover is growing from year to year
Analytical analysis Comparison with accepted practice in the industry Trend analysis Analysis of main accounts (customers, suppliers, material items of inventory) Locating "warning lights"
Examination of accounting values Inventory Mapping Slow moving inventory, edge inventory Doubtful debts Customer's debt "aging"
Examination of internal procedures Purchasing procedure Handling stock surplus Stocktaking Debt Collection from customers Goods return policy
Submission of a summary report to the Bank: Description of the Company's activity Explanation of the item under review Description of the tests performed Tables and graphs that show indicators and trends related to the item under review Reference to the internal procedures relevant to the subject Conclusions