Professional Documents
Culture Documents
Chapter 9 Edited
Chapter 9 Edited
AUDIT OF
REVENUE CYCLE
Learning Outcomes
Customer’s Orders
A sales order is the first transaction trail of
documentary evidence.
The authenticity of the order needs to be checked
so that there are no fictitious transactions created
or to ensure the occurrence of sales
transactions
Audit objective: occurrence
Credit Approval
Credit approval is entrusted to an independent
department from the sales department to avoid
making credit sales to customers with poor credit
risks.
The manager only approves the credit sales amount
to the customer up to the authorized credit limit.
Audit objective : accuracy and valuation and
allocation.
Issuing Goods
The approved sales orders will be sent to the
warehouse where stocks are maintained by a
storekeeper.
The storekeeper prepares stocks for shipment.
The shipment of goods is enclosed with a shipping
document such as a bill of lading (pre-numbered).
Audit objective: cut-off, occurrence,
completeness
PROCEDURES TO
DESIGNING SUBSTANTIVE ASCERTAIN ADEQUACY OF
PROCEDURES THE ALLOWANCE
To ensure that the type of FOR BAD DEBTS
procedures is effective to The risk of uncollectable
obtain appropriate audit amounts of receivables
evidence to determine the
existence of sales and
03 substantive 01 should be assessed by the
procedures auditor. The auditor should
receivables transactions. review and test the process
used by management to
estimate the allowance for
DISCLOSURE
The auditor should know 02 bad debts.
the disclosure
requirements of the
account receivable
disclosure.
Sales Receivables
To substantiate the occurrence of sales To substantiate the existence of
receivables
To establish completeness of sales To establish completeness of receivables
To verify cut-off of sales transactions To determine whether the client has the
rights to the receivables
To establish accuracy of sales transactions To verify that the client established a
proper valuation of receivables
To ensure that the presentation and To ensure that the presentation and
disclosure of sales are appropriate disclosure of receivables are appropriate