Tutorial 6 Flashcards
What is an example of an analytical procedure for testing revenue?
Comparing current year revenue to prior year revenue.
What assertion is affected if sales are overstated through fictitious transactions?
Occurrence – the sales may not have actually happened.
What audit procedure verifies the cut-off of revenue?
Select goods despatch notes (GDNs) just before and after year-end and trace to sales invoices.
What audit procedure tests the occurrence assertion for revenue?
Inspect post year-end credit notes to ensure they relate to genuine pre-year-end sales.
How do you verify the accuracy and presentation of receivables?
Cast the aged receivables listing and agree it to the financial statements.
How do you verify the completeness and existence of receivables?
Agree the control account with the ledger listing
How do you verify the existence of receivables?
- Select year-end receivables and trace to GDNs and sales orders.
- Perform receivables circularisation (confirmations).
- Inspect after-date cash receipts and match to balances.
How do you verify the valuation and rights and obligations of receivables?
- Inspect after-date cash receipts.
- Review aged receivables report for slow-moving accounts.
- Discuss significant balances with management.
- Inspect customer correspondence about disputed invoices.
How do you test for classification and possible overstatement of receivables?
Inspect the ledger for credit balances and reclassify as payables if necessary.
How do you test valuation using internal documentation?
Inspect board minutes for any receivables recommended for write-off.
What analytical procedure can be used to test receivables?
Calculate the average receivables collection period and compare to the prior year.
