Vouch sales transactions to customer orders and

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Vouch sales transactions to customer orders and evidence of shipment Valuation  o Compare quantities billed and shipped with customer orders and verify  clerical accuracy of sales invoices o Cutoff issues: to assuring the existence and completeness of the  revenue truncation in any given period  Cutoff tests:  procedures applied to sales, sales returns and cash receipts  transactions selected from those recorded during the cutoff period to  provide evidence as to whether the transactions have been recorded in the  proper period o Cutoff period: several days before and after the balance sheet date Sales cutoff: test shipping documents and related recorded sales o Select a sample of sales transactions from the cutoff period to  determine the correct time period of recording o Examine the dales contracts to determine the existence of terms that  might indicate that the recording of the sale should be postponed Sales returns cutoff: test receiving reports and related credits to customer  accounts Completeness o Pre-numbered shipping and billing documents Substantive tests of accounts receivable Existence Confirmation  Valuation: price testing  Recorded at their correct value (gross value)?   addressed during the  auditor’s tests of transactions processing and confirmation work
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Auditing revenue and related accounts  15:19 Collect the outstanding receivables (net realizable value)?   related to  determining the reasonableness of the allowance for doubtful accounts  Rights and obligations Inquiry Review contracts Presentation and disclosure Inquiry as to pledged, discounted or assigned receivables  Standard receivables audit procedures Test aging schedule e.g. over 120 uncollectible  Confirmations  o Required unless:  accounts receivable are not material;   the use of  confirmation would be ineffective; risk of material misstatement is low o Positive:  are letters sent to selected customers asking them to review  the current balance or unpaid invoices due the client and return the  letters directly to the auditor indication whether they agree with the  balance o Negative : asks the customer to review the client’s balance but  requests the customer to respond directly to the auditor only if the  customer disagrees with the indicated balance; less expensive  because of no follow-up procedures o Auditors selects sample to confirm Sampling unit: customer’s entire balance or selecting one or more  of the unpaid invoices make up that balance  o Auditor control mailing o Auditor investigates  undeliverable confirms o Alternative procedure o Follow-up
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