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    Assurance Services and The Integrity of Financial Reporting, 8 Edition

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    Eza R
    This document provides an overview of Chapter 14 from the textbook "Modern Auditing: Assurance Services and the Integrity of Financial Reporting, 8th Edition". The chapter discusses auditing the revenue cycle, including inherent risks, analytical procedures, internal controls, substantive tests of accounts receivable, and designing tests of details. Key parts of the revenue cycle are credit sales transactions, cash receipts transactions, and sales adjustment transactions.

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    Assurance Services and The Integrity of Financial Reporting, 8 Edition

    Uploaded by

    Eza R
    90 views32 pages
    This document provides an overview of Chapter 14 from the textbook "Modern Auditing: Assurance Services and the Integrity of Financial Reporting, 8th Edition". The chapter discusses auditing the revenue cycle, including inherent risks, analytical procedures, internal controls, substantive tests of accounts receivable, and designing tests of details. Key parts of the revenue cycle are credit sales transactions, cash receipts transactions, and sales adjustment transactions.

    Original Description:

    Revenue Cycle

    Original Title

    Ch14 Revenue Cycle

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    This document provides an overview of Chapter 14 from the textbook "Modern Auditing: Assurance Services and the Integrity of Financial Reporting, 8th Edition". The chapter discusses auditing the revenue cycle, including inherent risks, analytical procedures, internal controls, substantive tests of accounts receivable, and designing tests of details. Key parts of the revenue cycle are credit sales transactions, cash receipts transactions, and sales adjustment transactions.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    90 views32 pages

    Assurance Services and The Integrity of Financial Reporting, 8 Edition

    Uploaded by

    Eza R
    This document provides an overview of Chapter 14 from the textbook "Modern Auditing: Assurance Services and the Integrity of Financial Reporting, 8th Edition". The chapter discusses auditing the revenue cycle, including inherent risks, analytical procedures, internal controls, substantive tests of accounts receivable, and designing tests of details. Key parts of the revenue cycle are credit sales transactions, cash receipts transactions, and sales adjustment transactions.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 32

    Modern

    Modern Auditing:
    Auditing:

    Assurance
    Assurance Services
    Services and
    and the
    the Integrity
    Integrity
    th
    of
    Financial
    Reporting,
    8
    of Financial Reporting, 8th Edition
    Edition
    William C. Boynton

    California Polytechnic State


    University at San Luis Obispo

    Raymond N. Johnson
    Portland State University

    Chapter 14 Auditing the Revenue Cycle

    Chapter
    Chapter Overview
    Overview

    The
    The Revenue
    Revenue Cycle
    Cycle

    Develop
    Develop Audit
    Audit Objectives
    Objectives

    Inherent
    Inherent Risk,
    Risk, Including
    Including the
    the Risk
    Risk
    of
    of Fraud
    Fraud
    Management Misstatement of Revenue

    Overstate revenues
    Overstate cash and gross receivables
    Understate allowance for doubtful accounts

    Other Misstatement Factors

    Opportunities for error


    Timing
    Misclassification
    Adjustment transactions

    Analytical
    Analytical Procedures
    Procedures

    Consideration
    Consideration of
    of Internal
    Internal Control
    Control
    Components
    Components
    Control Environment
    Risk Assessment
    Information and Communication
    Monitoring
    Initial Assessments of Control Risk

    Study
    Study Break
    Break
    1. The revenue cycle includes all of
    the following transactions, except:
    A.
    B.
    C.
    D.

    Credit Sales
    Cash Receipt
    Inventory Purchase
    Sales Returns and Allowances

    C. Inventory Purchase

    Study
    Study Break
    Break
    2. This internal control component should
    provide management with feedback as
    to whether internal controls pertaining
    to revenue cycle transactions and
    balances are operating as intended.
    A.
    B.
    C.
    D.

    Monitoring
    Initial Assessments of Control Risk
    Information and Communication
    Control Environment

    A. Monitoring

    Control
    Control Activities
    Activities for
    for Credit
    Credit
    Sales
    Sales Transactions
    Transactions
    Credit Sales Orders
    Over-the-Counter
    Mail Order
    Internet

    Computerized Accounting System


    General Controls
    Application Controls

    Common
    Common Documents
    Documents and
    and
    Records
    Records
    Customer Order
    Sales Order
    Shipping Document
    Bill of Lading
    Packing Slip

    Sales Invoice
    Authorized Price List

    Common
    Common Documents
    Documents and
    and
    Records
    Records
    Sales Transactions File
    Sales Journal
    Customer Master File
    Accounts Receivable Master File

    Accounts receivable subsidiary ledger

    Customer Monthly Statement

    Function
    Function and
    and Control
    Control Activities
    Activities
    Authorizing Sales

    Accepting Customer Orders


    Approving Credit

    Delivery of Goods and Services


    Filling Sales Orders
    Shipping Sales Orders

    Recording Sales

    System
    System Flowchart
    Flowchart Credit
    Credit Sales
    Sales

    System
    System Flowchart
    Flowchart Credit
    Credit Sales
    Sales

    System
    System Flowchart
    Flowchart Credit
    Credit Sales
    Sales

    Study
    Study Break
    Break
    3. This document is a journal listing
    of the completed sales
    transactions.
    A.
    B.
    C.
    D.

    Sales invoice
    Sales transactions files
    Authorized price list
    Sales journal

    D. Sales journal

    Study
    Study Break
    Break
    4. This document shows the
    description, quantity, and other
    data pertaining to a customer
    order.
    A.
    B.
    C.
    D.

    Customer order
    Sales order
    Shipping document
    Sales invoice

    B. Sales order

    Cash
    Cash Receipts
    Receipts Transactions
    Transactions
    Common
    Common Documents
    Documents and
    and Records
    Records
    Remittance Advice
    Prelist
    Cash Count Sheets
    Daily Cash Summary
    Validated Deposit Slip
    Cash Receipts Transactions File
    Cash Receipts Journal

    Cash
    Cash Receipts
    Receipts Transactions
    Transactions -Functions
    Functions
    Receiving Cash Receipts

    Over-the-Counter Receipts
    Mail Receipts

    Depositing Cash in Bank


    Deposited intact daily

    Recording the Receipts

    Sales
    Sales Adjustment
    Adjustment Transactions
    Transactions
    Common
    Common Documents
    Documents and
    and Records
    Records
    Sales return authorization
    Authorization for accounts receivable write-of
    Receiving report
    Credit memo
    Journal entry
    Cash Receipts journal

    Sales
    Sales Adjustment
    Adjustment Functions
    Functions and
    and
    Controls
    Controls
    Granting Cash Discounts
    Granting Sales Returns and Allowances
    Determining Uncollectible Accounts
    Other Controls
    Tests of Controls

    Study
    Study Break
    Break
    5. This cash receipts transaction
    document is a listing of cash
    receipts received through the
    mail.
    A.
    B.
    C.
    D.

    Remittance advice
    Prelist
    Daily cash summary
    Validated deposit slip

    B. Prelist

    Study
    Study Break
    Break
    6. All of the following are sales
    adjustment functions, except:
    A.
    B.
    C.
    D.

    Granting cash discounts


    Determining uncollectible accounts
    Recording the cash receipts
    Granting sales returns and allowances

    C. Recording the cash receipts

    Substantive
    Substantive Tests
    Tests of
    of Accounts
    Accounts
    Receivable
    Receivable
    Determining Detection Risk for Tests of
    Details
    Existence and Occurrence
    Completeness
    Rights and Obligations
    Valuation and Allocation
    Presentation and Disclosure

    Designing
    Designing Substantive
    Substantive Tests
    Tests
    Initial Procedures

    Analytical Procedures

    Designing
    Designing Substantive
    Substantive Tests
    Tests
    Tests of Details of Transactions
    Vouch Revenue Transactions
    Trace Revenue Transactions
    Perform Cutof Tests

    Sales Cutof Tests


    Sales Return Cutof Tests

    Perform Cash Receipts Cutof Test

    Designing
    Designing Substantive
    Substantive Tests
    Tests
    Tests of Details of Balances
    Confirm Receivables

    Forms of Confirmation
    Positive Confirmation
    Negative Confirmation

    Timing and Extent of Requests


    Controlling the Requests

    Designing
    Designing Substantive
    Substantive Tests
    Tests
    Tests of Details of Balances
    Disposition of Exceptions

    Alternative Procedures for Dealing with


    Nonresponses
    Summarizing and Evaluating Results
    Applicability to Assertions

    Designing
    Designing Substantive
    Substantive Tests
    Tests
    Tests of Details of Accounting
    Estimates

    Allowance for Doubtful Accounts


    Aged Trial Balance

    Tests of Details of Disclosures

    Study
    Study Break
    Break
    7. This type of confirmation requires
    a debtor to respond only when the
    amount shown is incorrect.
    A.
    B.
    C.
    D.

    Positive Confirmation
    Negative Confirmation
    Avoidance
    Existence

    B. Negative Confirmation

    Study
    Study Break
    Break
    8. This cutof test is designed to obtain
    reasonable assurance that cash receipts
    are recorded in the accounting period
    in which received.
    A.
    B.
    C.
    D.

    Sales cutof test


    Sales return cutof test
    Vouching revenue transactions
    Cash receipts cutof test

    D. Cash receipts cutof test

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