Week_9_Revenue_audio_2 narrated

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Part 2 of 3 related to the revenue cycle

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Chapter 07 :

Chapter 07 Revenue and Collection Cycle “ What at first was plunder assumed the softer name of revenue. ” Thomas Paine 7- 1

PowerPoint Presentation:

Exhibit 7.3 Revenue and Collection Cycle 7- 2

REVENUE AND COLLECTION CYCLE: Key Control Procedures:

REVENUE AND COLLECTION CYCLE: Key Control Procedures SEPARATION OF DUTIES Separate functions for recording, authorization, custody AUTHORIZATION OF TRANSACTIONS Write-offs EDI transactions Credit checks prior to approval of sale Pricing ACCESS TO ASSETS Shipping department Lock box account ADEQUATE DOCUMENTS AND RECORDS Pre-numbered sales orders, shipping documents (bills of lading), sales invoices Remittance advice INDEPENDENT CHECKS ON PERFORMANCE A/R subsidiary ledger to general ledger Monthly statement to customer 7- 3

Audit Evidence in Management Reports and Data Files:

Audit Evidence in Management Reports and Data Files Pending order master file Credit check/approval files Price list master file Sales detail file (sales journal) Sales analysis report Accounts receivable aged trial balance Cash receipts listing Customer Statements 7- 4

Other Controls:

Other Controls No sales order without customer order. Credit approval. Restricted access to inventory. Restricted access to terminals and invoices. All documentation in order to record sales. Proper dating. Invoices compared to BOLs and orders. Pending order files reviewed. 7- 5

PowerPoint Presentation:

Exhibit 7.5 Assertions about Classes of Transactions and Events for the Period 7- 6

PowerPoint Presentation:

Exhibit 7.6 Dual Direction of Test Audit Sample 7- 7

ANALYTICAL PROCEDURES:

ANALYTICAL PROCEDURES Sales Revenue Comparisons with previous periods Comparisons with industry Allowance for Doubtful Accts, Bad Debt Expense Bad Debt Expense as a percentage of Sales Allowance for Doubtful Accounts as a percentage of Gross Receivables Accounts Receivable Days Sales in Accounts Receivable Accounts Receivable Turnover 7- 8

Sales Comparisons:

Sales Comparisons Best if you can compare product lines over 3-5 year periods Look at gross margins in as much detail as possible. The more granular, the better

Analytical Procedures – cont. :

Analytical Procedures – cont. Allowance for doubtful accounts Look at AR turnover trends Look at returns trends For potential bad debts, compare AR aging reports to prior trends

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