Class_15_substantive_tests_web

Class_15_substantive_tests_web - Revenues, Receivables, and...

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AFM 451 1 Revenues, Receivables, and Revenues, Receivables, and Receipts Process Receipts Process
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AFM 451 2 1. Describe the revenues, receivables, and receipts process, including typical transactions , source documents, controls and account balances . Learning Objectives Learning Objectives 1. Outline control tests for auditing control over customer credit approval, delivery, accounts receivable, cash receipts and bank statement .
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AFM 451 3 Overall strategy Overall strategy Planning materiality ID material F/S components ID high risk audit areas Determine audit evidence required to assess I/ C Determine control framework or criteria to assess CR ID nature and volume of transactions Discover any changed to the environment the client functions in
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AFM 451 4 Risk Assessment for Revenues, Risk Assessment for Revenues, Receivables and Receipts Receivables and Receipts An organization’s ability to generate revenues are critical aspects that an auditor must understand. The auditor mainly considers revenue and receipt transactions and accounts receivable balances . Management’s assertions regarding existence, ownership, completeness, valuation and disclosure all risks the auditor needs to consider.
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AFM 451 5 Typical records and transactions Typical records and transactions in the sales cycle in the sales cycle Sale is initiated with a customer order ; shipping documents and sales invoice accompany the sale, which is recorded both in a transaction file (sales) and summarized in a customer master file (or in a database) Routine reports include a sales journal and an aged accounts receivable trial balance
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AFM 451 6 Classes of transactions in the Classes of transactions in the sales and collection cycle sales and collection cycle Sales (cash and on account) Cash receipts Sales returns and allowances Charge-off (or write-off) of un-collectible accounts Bad-debt expense
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Revenue and Collection Revenue and Collection Cycle Cycle Start Here Customer Orders Bill Customers Collections Warehousing Shipping and Delivery Credit Granting
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AFM 451 8 Control differences batch vs Control differences batch vs online: online: audit trails audit trails Batch systems : Transactions readily traced from source transaction to G/L posting Totals from groups of transactions are totaled, and these totals traced Online systems : Transactions may be initiated and recorded without source documents (e.g. phone orders) Document sequencing is important to track documents.
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AFM 451 9 Control differences batch vs Control differences batch vs online: online: Batch systems : If one transaction is in error, the whole batch is rejected Error follow up is required to ensure timely processing and avoid cutoff errors Online systems : Focus is on preventing errors Input edit processes check for valid customer data and reasonableness
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AFM 451 10 Control differences batch vs online:
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This note was uploaded on 11/23/2009 for the course AFM 480 taught by Professor Gb during the Spring '09 term at Waterloo.

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Class_15_substantive_tests_web - Revenues, Receivables, and...

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