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    Apc 301 Week 8

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    Angel Lourdie Lyn Hosenilla
    The different levels of control risk in the revenue and collection cycle directly affect the nature, timing and extent of accounts receivable confirmation procedures. High control risk can lead auditors to audit large receivables close to the fiscal year end using positive confirmations and subsequent payment vouching. To prevent employee theft, the internal control system must prohibit an employee from having custody of both company and non-company funds, and ensure receipts are recorded daily with independent bank reconciliations. It is necessary to re-evaluate controls after testing to determine which are adequate to justify the control risk assessment and ensure controls are operating effectively.

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    Apc 301 Week 8

    Uploaded by

    Angel Lourdie Lyn Hosenilla
    48 views2 pages
    The different levels of control risk in the revenue and collection cycle directly affect the nature, timing and extent of accounts receivable confirmation procedures. High control risk can lead auditors to audit large receivables close to the fiscal year end using positive confirmations and subsequent payment vouching. To prevent employee theft, the internal control system must prohibit an employee from having custody of both company and non-company funds, and ensure receipts are recorded daily with independent bank reconciliations. It is necessary to re-evaluate controls after testing to determine which are adequate to justify the control risk assessment and ensure controls are operating effectively.

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    Auditing and Assurance Principles

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    apc 301 week 8

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    The different levels of control risk in the revenue and collection cycle directly affect the nature, timing and extent of accounts receivable confirmation procedures. High control risk can lead auditors to audit large receivables close to the fiscal year end using positive confirmations and subsequent payment vouching. To prevent employee theft, the internal control system must prohibit an employee from having custody of both company and non-company funds, and ensure receipts are recorded daily with independent bank reconciliations. It is necessary to re-evaluate controls after testing to determine which are adequate to justify the control risk assessment and ensure controls are operating effectively.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    48 views2 pages

    Apc 301 Week 8

    Uploaded by

    Angel Lourdie Lyn Hosenilla
    The different levels of control risk in the revenue and collection cycle directly affect the nature, timing and extent of accounts receivable confirmation procedures. High control risk can lead auditors to audit large receivables close to the fiscal year end using positive confirmations and subsequent payment vouching. To prevent employee theft, the internal control system must prohibit an employee from having custody of both company and non-company funds, and ensure receipts are recorded daily with independent bank reconciliations. It is necessary to re-evaluate controls after testing to determine which are adequate to justify the control risk assessment and ensure controls are operating effectively.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    1.

    How do different levels of control risk in the revenue and collection cycle affect the nature,
    timing and extent of accounts receivable confirmation procedures?

    The different levels of control risk in the revenue and collection cycle affect the nature,
    timing and extent of accounts receivable confirmation procedures directly. Since the high
    levels of control risk can make auditors to audit large receivables that has close confirmation
    date to the fiscal year end date. And with regards to nature, in enables the auditors to use
    positive confirmations and consider the vouching subsequent payments made by the
    customers.

    2. What feature(s) of cash receipts internal control system would be expected to prevent (A)
    an employee's absconding with company funds and replacing the funds during the audit
    engagements with cash from the employee pension fund, and (B) the cash receipts journal
    and recorded cash sales from reflecting more than the amount shown on the daily deposit
    slip?

    The feature of cash receipts internal control system that would be expected to prevent
    an employee from absconding with company funds and replacing the funds during the audit
    engagements with cash from employee pension fund is the prohibition to an employee on
    having custody of both the company funds and the non-company funds. The auditor can
    possibly detect by his/her control and through counting the funds. To prevent this situation b,
    the internal control system must take charge to make sure that the receipts must be recorded
    daily. The error can be detected by the thorough bank reconciliation by an independent
    person.

    3. Why is it necessary to evaluate the control after the test of controls audit of the revenue and
    collection cycle when an evaluation was already made after the understanding phase?

    It is necessary to evaluate the control in order to determine which of the controls are
    adequate that will be use as a basis for justifying a low control risk assessment. And the final
    assessment is used to determine the controls if it is operating well.

    4. Describe the processing of transactions in the sales and collections cycle in the following
    functions: Order entry 

    5. Describe the processing of transactions in the sales and collections cycle in the following
    functions: Credit approval
    6. Describe the processing of transactions in the sales and collections cycle in the following
    functions: Warehousing

    7. Describe the processing of transactions in the sales and collections cycle in the following
    functions: Shipping

    8. Describe the processing of transactions in the sales and collections cycle in the following
    functions: Customer billing

    9. Describe the processing of transactions in the sales and collections cycle in the following
    functions: Collecting accounts receivable

    10. Describe the processing of transactions in the sales and collections cycle in the following
    functions: Granting credit for returns and allowances *

    11. Describe the processing of transactions in the sales and collections cycle in the following
    functions: Recording uncollectible accounts expense *

    12. Describe the processing of transactions in the sales and collections cycle in the following
    functions: Writing off collectible accounts *

    13. Why do people perpetrate fraud involving sales transactions?

    14. Why is it difficult to detect the withholding of cash receipts?

    15. Identify three ways an employee might misappropriate cash receipts. 

    16. What concern does an auditor have in auditing adjustments to sales? 

    17. When an entity's controls for collection are ineffective, what potential misstatements could
    arise in the financial statements? 

    18. What tests of controls related to uncollectible accounts do auditors perform? 

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