Kế toán, kiểm toán - Chapter 11: Accounts receivable, notes receivable and revenue

Accounts Receivable, Notes Receivable and RevenueChapter 11 Internal Control Over the  Revenue CycleControlling customers’ ordersCredit approvalIssuing merchandiseShippingBillingAdjustments to sales and receivables2Revenue Cycle--Documents Customer purchase orderSales orderBill of ladingInvoiceControl listing Credit memo3 Revenue Cycle ControlsSegregation of duties--sales and collectionsMatching of sales invoices and shipping documentsClerical accuracy checks on invoicesCredit approval for sales transactionsMailing of monthly statementsReconciliation of bank accountsUse of control listing of cash receiptsUse of budgets and analysis of variancesControl over shipping and billing documentsUse of authorized credit memorandaUse of chart of accounts and review of account codings45Objectives for the Audit of Receivables and RevenueConsider inherent risks of receivables and revenue, including fraud risks.Consider control risk for receivables and revenue.Substantiate the existence of receivables and the occurrence of revenue transactionsEstablish the completeness of receivables and revenue transactionsDetermine that the client has rights to the recorded receivablesDetermine that the valuation of receivables and revenue is at appropriate net realizable valueDetermine that the presentation and disclosure of receivables and revenue are adequate6Substantive Tests of Receivables and Revenue7Confirmation of ReceivablesReceivables should be confirmed, unless:Accounts receivable are immaterial,The use of confirmations would be ineffective, orThe auditors’ combined assessment of inherent and control risk is low, and audit risk can be reduced to acceptably low level with substantive tests8Flowchart of the Confirmation Process APrepare and Mailthe RequestsSend 2nd requests forpositive confirmationsPerform alternativeprocedures fornon-respondentsResolve exceptionsDocument the procedures and resultsDevelop Audit ObjectivesChoose Appropriate Confirmation FormDetermine the timing and extentIdentify the information to be confirmedASelect the accountsfor confirmation9Criteria for Recognition of RevenuePersuasive evidence of an arrangement existsDelivery has occurred or services have been renderedThe seller’s price to the buyer is fixed or determinableCollectibility is reasonably assured Source: SEC Staff Accounting Bulletin No. 101. 10Potential Revenue Recognition ProblemsSales with unusual right to returnSide agreementsFranchise feesBill and hold transactionsSales using notes with unusual interest ratesPercentage-of-completion method of revenue recognitionMultiple element agreements11