11 -- Evidence—The Sales-Receivables-Cash Cycle

11 -- Evidence—The Sales-Receivables-Cash...

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CPA AUDITING - STUDY UNIT 11 Evidence – The Sales-Receivables-Cash Cycle: Core Concepts Apply the CAVE CROC acronym as a mnemonic for management’s assertion. A. Substantive Testing of Sales and Receivables 1. The Completeness assertion is tested by reconciling the subsidiary and general ledgers; calculating and comparing ratios for the current period with those of prior periods and industry norms; accounting for the numerical sequence of sales-related documents, such as sales orders, shipping documents, and invoices; and vouching shipping documents back to sales invoices and journal entries. 2. The Accuracy assertion is tested by obtaining a management representation letter that includes assertions relating to sales and receivables; and determining whether an entity has appropriately identified its reportable operating segments. 3. The Valuation and allocation assertion is tested by aging accounts receivable; tracing subsequent cash receipts; and reviewing delinquent customers’ credit ratings. 4.
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11 -- Evidence—The Sales-Receivables-Cash...

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