Audit Risk and Response (3)

Question 1

Risk for receipts?

Answer 1

Receipts/invoicing significantly in advance/arrears of providing services or goods, therefore leading to an increased risk of revenue being in the wrong period

Question 2

Example of risk for receipts?

Answer 2

Deposits received in advance
Reservation fees
Contracts spanning the year end

Question 3

Auditor’s response to receipts risk (sample)

Answer 3

Sample of revenue entries recorded prior to year end, agree transactions relating to pre year end sales bu inspecting contract/other supporting documentation

Question 4

Auditor’s response to receipts risk (transactions)

Answer 4

Trace past year end transactions back to a supporting contract/documentation to test that revenue was recorded in proper period

Question 5

Auditor’s response to receipts risk (GDN)

Answer 5

For a sample of contracts or GDNs, verify revenue was recognised according to provision of services/goods

Question 6

Auditor’s response to receipts risk (Analytical)

Answer 6

Perform analytical procedures where monthly revenue compared to expectations and budgeted revenue. Unexpected deviations should be investigated

Question 7

Risk for invoices?

Answer 7

Invoices received/payments made in advance/arrears of goods or services delivery date leading to overstatement/understatement of costs and/or liabilities

Question 8

Auditors resposne to invoice risk (review)

Answer 8

Review post year end bank statements / cash book payments for evidence of amounts relating to financial year but not included in liabilities

Question 9

Auditors resposne to invoice risk (sample)

Answer 9

Sample of documents pre and post year end indicating date of delivery of goods/services (GRM), verify cost and liability were recorded in appropriate period