Bank Field Auditing Case Study 2 - Reviewing a Loan Applicant’s Receivables

Challenge

A local bank was evaluating an asset-based loan collateralized by accounts receivable. The bank called on Skoda Minotti’s Transaction Advisory Services Group to conduct a review of the
loan applicant’s receivables.

Solution

In our assessment of the loan applicant’s receivables, we reviewed and tested many aspects of the applicant’s receivables:

  • Gained a thorough knowledge of the applicant’s credit policy and collection procedures
  • Reviewed overall revenue recognition, accounts receivable and cash collection processes and systems
  • Computed and reviewed changes in agings over time
  • Computed and reviewed roll forward statistics including dilution and turnover
  • Reviewed for customer concentration
  • Tested invoicing processes
  • Tested credit memos application processes
  • Tested cash application processes
  • Performed a sales reconciliation by rolling accounts receivable forward to financial statements.
  • Based on the bank’s criteria and the results of our diligence, our team calculated a recommended borrowing base.

Results

Following our analysis, the bank brought our recommendation to the loan committee and the applicant was awarded the line of credit.

Related Case Studies

  • Bank Field Auditing Case Study 1 - Evaluating a Loan to a Private Equity Group

    Bank Field Auditing Case Study 1 - Evaluating a Loan to a Private Equity Group

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