ugaud.ch10 - Chapter 10: Auditing the Revenue Process Types...

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11 Types of Transactions and Financial Statement Accounts Affected Three types of transactions are typically processed by the revenue process: 1. The sale of goods or rendering of a service for cash or credit. 2. The receipt of cash from the customer in payment for goods or services. 3. The return of goods by the customer for credit or cash. Chapter 10: Auditing the Revenue Process
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22 Review of Revenue Recognition Revenue Recognition: Before Revenue is recognized, it must be _________ and _________ Revenue is __________when a product or service is exchanged for cash, a promise to pay cash, or other assets that can be converted into cash. Revenue is __________when an entity has substantially completed the earnings process, which generally means a product has been delivered or a service has been provided. Beware of side agreements and channel stuffing
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33 Review the way transactions flow through the system in the flowchart on pp. 356-358. Review the descriptions of documents and records on pp. 358-361. Review segregation of duties in the revenue process on p. 363. Review of the Revenue Process and Types of Documents and Records
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44 Inherent Risk Assessment 4 Specific IR Factors in Revenue Process: 1. Industry-related factors 2. Complexity of revenue recognition issues 3. Difficulty of auditing transactions and account balances 4. Misstatements detected in prior years
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55 Control Risk Assessment Understanding and documenting the revenue process based on a reliance approach. Planning and performing tests of controls on revenue transactions. Setting and documenting the control risk for the revenue process. If the results of the tests of controls support the planned level of control risk, the auditor conducts the planned level of substantive testing.
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Assertions we are concerned about in Sales & A/R part of the Revenue Process P All revenues and receipts have been disclosed properly.
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This note was uploaded on 05/13/2011 for the course BUSACC 1238 taught by Professor Hoffman during the Spring '11 term at Pittsburgh.

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ugaud.ch10 - Chapter 10: Auditing the Revenue Process Types...

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