CACC521-Week10

CACC521-Week10 - Ch11 MC 1c, 2a, 3b, 4d, 5d, 6c, 7c, 8b,...

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Ch11 MC 1c, 2a, 3b, 4d, 5d, 6c, 7c, 8b, 9c, 10c, 11c, 12a, 13b, 14c, 15a, 16a Core knowledge question process pre-audit condition Chapter 11Revenues, Receivables, and Receipts Process Chapter 11Revenues, Receivables, and Receipts Process Learning Objectives Describe the revenues, receivables, and receipts process, including typical transactions, source documents, controls and account balances. Outline control tests for auditing control over customer credit approval, delivery, accounts receivable, cash receipts and bank statement. Explain the importance of the existence assertion for the audit of cash and accounts receivable. Identify considerations for using confirmations when auditing cash and accounts receivable. Perform substantive audit procedures for the audit of bank statement reconciliations, explaining how auditors can search for lapping and kiting. Chapter Overview Understanding the Revenues, Receivables, and Receipts Process Control Risk Assessment Special Note: The Existence Assertion Special Note: Using Confirmations Special Note: Audit of Bank Reconciliations with attention to Kiting and Lapping Understanding the Revenue, Receivables and Receipts Process The auditor must understand the business’s method of generating revenues and use of them in operations in order to assess the business risk and risk of misstatement. Auditors risk of being sued Risk Assessment for Revenues, 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 present risks the auditor needs to consider. Revenues, Receivables and Receipts Process: Typical Activities Refer to Exhibit 11-1 Revenue, receivables and receipt process activities include: Receiving and processing customer orders. Delivering goods and services to customers. Billing customers and accounting for receivables. Collecting and depositing cash. Reconciling bank accounts. Bill and hold - potential area of fraud, revenue recording issues source documents for completeness
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Revenue and Collection Process Authorization When a customer order is received, a number of authorizations are required. Customer status, credit status and availability of inventory need to be verified before a sales order can be created. - walk through, test of control The proper price for the sale also needs to be determined. - authorization of discounts, valuation issue that product is sold for price on price list. Once approved, an open sales order and a packing slip are created, and inventory may be updated for the commitment of goods. test of controls - authorization
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This note was uploaded on 04/14/2011 for the course ACC 521 taught by Professor G.caers during the Spring '11 term at Ryerson.

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CACC521-Week10 - Ch11 MC 1c, 2a, 3b, 4d, 5d, 6c, 7c, 8b,...

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