Some substantive analytical procedures for revenue

Some substantive analytical procedures for revenue
and accounts receivable (EMGP: Table 10-9)
• Comparison of revenues with units shipped or
production levels
• Analysis of daily or weekly revenues around year-end
• Comparison with previous year’s and/or industry:
– revenue and gross profit percentage by product
– receivable turnover and days outstanding
– allowance for uncollectible accounts as a percentage of
accounts receivable
– bad debt expense as a percentage of credit sales
– sales returns as a percentage of revenue
5

Substantive tests of revenue transactions
(EMGP: Table 10-10)
Assertions Audit Procedures
Occurrence For a sample of sales transactions recorded in the sales
journal, vouch the sales invoices back to customer orders
and shipping documents.
Completeness Trace a sample of shipping documents to the details of the
sales invoices and to the sales journal and customers’
accounts receivable subsidiary ledger.
Accuracy Compare prices and terms on a sample of sales invoices with
authorized price list and terms of trade
Cut-off Compare the dates on a sample of sales invoices with the
dates of shipment and with the dates they are recorded in
the sales journal.
Classification Examine a sample of sales invoices for proper classification
into revenue accounts
6

Substantive tests of account receivable balances
(EMGP: Table 10-10)
Assertions Audit Procedures
Existence
• Confirmation of selected accounts receivable.