Audit Procedures Description

Prepare a lead schedule Prepare a lead schedule of revenue

Revenue recognition Perform revenue recognition procedures (if not already covered by tests of
procedures receivables, trade and intercompany), for example, analytical procedures
using disaggregated data (e.g., by month, by product line, by geographical
area, by segment), inquiry of sales and marketing personnel for any
unusual transactions or similar items, review of the terms of sales
agreements - including sales incentives- and entity's policies for handling
returns, to identify potential unusual transactions or events. Perform tests
of transactions based on the combined risk assessment, when required.
Sales returns and Evaluate the entity’s ability to reasonably estimate future product returns
provision analysis to support revenue recognition at the time of delivery. Perform procedures
to evaluate the provision for future product returns. Investigate significant
or unusual changes from the prior period based on actual sales returns in
the current period to determine whether the current period provision for
future product returns may require adjustment.
Compare analysis of sales Obtain or prepare a comparative analysis of sales (by product line, location,
with prior period etc.) and other income accounts for the current and prior period and obtain
explanations from the entity for accounts that changed. Examine evidence
to corroborate explanations obtained.
Compare sales activity by Review sales activity by month/quarter for unusual fluctuations (consider
month/quarter breakdown by product line or location, if available). Consider comparison
to prior period's amounts.
Compare discounts, If not performed as part of the trade receivable procedures, compare
returns and allowances, discounts, returns, and allowances with prior period (or % of sales). Obtain
debits with prior period explanations for significant unexpected fluctuations compared to our
and revenues to budget expectations developed. Verify explanations obtained from management
with corroborating evidence.
Compare revenues to Compare actual revenues to budgeted revenues. Obtain explanations for
budget significant unexpected fluctuations compared to our expectations
developed. Verify explanations obtained from management with
corroborating evidence. Note: this procedure can be done in connection
with the review of costs and expenses.
Review trade receivable If not performed as part of the trade receivable procedures, review the
and sales accounts in the trade receivable and sales accounts in the general ledger and the sales and
general ledger cash receipts journals for unusual items. Investigate any unusual items
observed. Identify and understand the reason for any large debit
transactions/balances on the trade receivable subledger.
Detailed tests of shipping Select a sample of shipment transactions from the shipping records from
records throughout the period and determine whether they are properly recorded
by comparing information from the shipping documents to invoices and
tracing invoice information through the accounting system to recording in
the general ledger.
Check the numerical sequence of sales invoices and/or shipping documents
Completeness of sequence for completeness.
Test the clerical accuracy of the sales journal for 2 months during the
Accuracy of sales journal period and trace totals to the general ledger.
Refer to the trade receivables procedures for the procedures relating to
Cutoff tests of cutoff of sales invoices and credit memos.
Reperform foreign Select transactions from the ledger and reperform the calculation of the
exchange calculations and foreign exchange gain or loss. Agree rates used with supporting
agree with supporting documentation.
documentation