tailieunhanh - Lecture Principles of auditing and other assurance services (15/e): Chapter 11 - Whittington, Pany

Chapter 11 - Accounts receivable, notes receivable and revenue. In this chapter we described the details of controls over receivables and revenue, the auditors' consideration of these controls, and substantive tests of the receivables and revenue accounts. | Accounts Receivable, Notes Receivable and Revenue Chapter 11 1 Internal Control Over the Revenue Cycle Controlling customers’ orders Credit approval Issuing merchandise Shipping Billing Adjustments to sales and receivables 11- 2 2 Revenue Cycle--Documents Customer purchase order Sales order Bill of lading Invoice Control listing Credit memo 11- 3 4 Revenue Cycle Controls Segregation of duties--sales and collections Matching of sales invoices and shipping documents Clerical accuracy checks on invoices Credit approval for sales transactions Mailing of monthly statements Reconciliation of bank accounts Use of control listing of cash receipts Use of budgets and analysis of variances Control over shipping and billing documents Use of authorized credit memoranda Use of chart of accounts and review of account codings 11- 4 5 11- Objectives for the Audit of Receivables and Revenue Consider inherent risks of receivables and revenue, including fraud risks. Consider control . | Accounts Receivable, Notes Receivable and Revenue Chapter 11 1 Internal Control Over the Revenue Cycle Controlling customers’ orders Credit approval Issuing merchandise Shipping Billing Adjustments to sales and receivables 11- 2 2 Revenue Cycle--Documents Customer purchase order Sales order Bill of lading Invoice Control listing Credit memo 11- 3 4 Revenue Cycle Controls Segregation of duties--sales and collections Matching of sales invoices and shipping documents Clerical accuracy checks on invoices Credit approval for sales transactions Mailing of monthly statements Reconciliation of bank accounts Use of control listing of cash receipts Use of budgets and analysis of variances Control over shipping and billing documents Use of authorized credit memoranda Use of chart of accounts and review of account codings 11- 4 5 11- Objectives for the Audit of Receivables and Revenue Consider inherent risks of receivables and revenue, including fraud risks. Consider control risk for receivables and revenue. Substantiate the existence of receivables and the occurrence of revenue transactions Establish the completeness of receivables and revenue transactions Determine that the client has rights to the recorded receivables Determine that the valuation of receivables and revenue is at appropriate net realizable value Determine that the presentation and disclosure of receivables and revenue are adequate 11- 6 2 Substantive Tests of Receivables and Revenue 11- 7 3 Confirmation of Receivables Receivables should be confirmed, unless: Accounts receivable are immaterial, The use of confirmations would be ineffective, or The auditors’ combined assessment of inherent and control risk is low, and audit risk can be reduced to acceptably low level with substantive tests 11- 9 Flowchart of the Confirmation Process A Prepare and Mail the Requests Send 2nd requests for positive confirmations Perform alternative procedures for non-respondents Resolve exceptions .