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Chapter _10, Revenue-Receipts Internal Control

Chapter _10, Revenue-Receipts Internal Control -...

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ACCY360/560 Assurance Services “Internal Controls: Revenue/Receipts Cycle” Chapter #10 I. Consideration of internal control concepts in an audit A. Control environment -- Management's philosophy (control consciousness), organizational structure, corporate governance (audit committee?), etc. B. Information & communication system -- understanding of each of the transaction cycles (recall the “assertions” implicit in the financial statements) 1. Existence -- recorded transactions are valid 2. Completeness -- all transactions recorded 3. Rights & obligations -- any restrictions should be described in proper detail 4. Valuation -- measured appropriately according to GAAP 5. Presentation & disclosure -- fairly presented according to GAAP C. Control activities (recall "SCARE") – specific policies & procedures focusing on 1. Segregation of duties -- authorization (execution); access (custody); accounting (record-keeping) 2. Comparisons of recorded assets to actual assets on hand 3. Access to assets -- directly or indirectly should be as authorized 4. Records -- adequate documentation & records 5. Execution of transactions -- as authorized D. Risk assessment -- how risks are identified, prioritized, and managed by senior management E. Monitoring -- how the company tracks its systems and oversees adequacy of their systems on an on-going basis
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II III. Summary of "study & evaluation of I/C" -- must obtain a sufficient understanding of the 5 components of I/C structure for planning purposes [nature, timing, extent] A. Perform a preliminary review--through inspection, observation, & inquiries B.
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