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    Auditing The Revenue Cycle

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    JECEL CABGRIGA
    This document discusses controls over the revenue cycle, including input, process, and access controls. It describes testing credit authorization procedures, data validation controls, batch controls, file updating controls, and restricting access to data and assets. The purpose of these controls is to establish creditworthiness, detect data errors, reconcile transaction volumes, monitor data processing, and prevent unauthorized access that could enable fraud.

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    Auditing The Revenue Cycle

    Uploaded by

    JECEL CABGRIGA
    28 views7 pages
    This document discusses controls over the revenue cycle, including input, process, and access controls. It describes testing credit authorization procedures, data validation controls, batch controls, file updating controls, and restricting access to data and assets. The purpose of these controls is to establish creditworthiness, detect data errors, reconcile transaction volumes, monitor data processing, and prevent unauthorized access that could enable fraud.

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    This document discusses controls over the revenue cycle, including input, process, and access controls. It describes testing credit authorization procedures, data validation controls, batch controls, file updating controls, and restricting access to data and assets. The purpose of these controls is to establish creditworthiness, detect data errors, reconcile transaction volumes, monitor data processing, and prevent unauthorized access that could enable fraud.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    28 views7 pages

    Auditing The Revenue Cycle

    Uploaded by

    JECEL CABGRIGA
    This document discusses controls over the revenue cycle, including input, process, and access controls. It describes testing credit authorization procedures, data validation controls, batch controls, file updating controls, and restricting access to data and assets. The purpose of these controls is to establish creditworthiness, detect data errors, reconcile transaction volumes, monitor data processing, and prevent unauthorized access that could enable fraud.

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    Chapter 9:

    Auditing the Revenue Cycle


    INPUT CONTROLS
    Credit authorization procedures
    To establish the creditworthiness of the customer
    Credit department – responsible for implementing the firm’s credit policies.

    Testing credit procedures


     Verify effective procedures exist
     Verify information is adequately communicated
     Verify effectiveness of programmed decision rules (test data, ITF)
     Verify that authority for making credit decisions is limited to authorized credit
    personnel/procedures
     Perform Substantive Tests of Detail
     Review credit policy periodically and revise as necessary
    INPUT CONTROLS
    Data Validation Controls
    To detect transcription errors in transaction data before they are processed.

    Validation Test that are relevant to revenue cycle


     Missing data checks – presence of blank fields
     Numeric-Alphabetic data checks – correct form of data is in a field
     Limit checks – determine if the value in the field exceeds an authorized limit
     Range checks – data is within upper and lower limits
     Validity checks – compare actual values in a field against known acceptable values
     Check digit – identify keystroke errors by testing internal validity
    INPUT CONTROLS
    Testing Data Validation Controls
     Verifying that controls exist and are functioning effectively
     Validation of program logic to achieve some degree of assurance

    Batch controls
     Manage high volumes of transaction data through a system
     Purpose: to reconcile output produced by system with the input originally entered into the system
     Controls continue through all computer (data) processes
     Batch transmittal sheet:
     Unique batch number
     Batch date
     Transaction code
     Record count
     Batch control total (amount)
     Hast totals
    INPUT CONTROLS
    Testing batch controls
     Failures of batch controls indicates data errors
     Involves reviewing transmittal records of batches processed and reconcile them to the batch
    control log (batch transmittal sheet)
     Examine out-of-balance conditions and other errors to determine cause of error
     Review and reconcile transaction listings, error logs and logs of resubmitted records.
    PROCESS CONTROLS
     Computerized procedures for file updating and restricting access to data
     Techniques:
     File update controls -- Run-to-run batch control data to monitor data processing
    steps
     Transaction code controls – to process different transactions using different
    programming logic
     Sequence check controls – sequential files, proper sorting of transaction files
    required
     Testing file update controls – results in errors

    Testing data that contains errors (incorrect transaction codes, out of sequence)
    Can be performed in ITF or test data
    CAATTs requires careful planning
    Single audit procedure can be devised that performs all tests in one operation.
    ACCESS CONTROLS
     Prevent and detect unauthorized and illegal access to firm’s systems and/or
    assets
     Techniques:
     Using warehouse security
     Depositing cash daily in the bank
     Using a safe or night deposit box for cash
     Locking cash drawers and safes in the cash receipts department
     Risk in Revenue Cycle
     Removal of an account from books
     Unauthorized shipments of goods using blank sales orders
     Removal of cash, covered by adjustments to cash account
     Theft of products/inventory, covered by adjustments to inventory or cash accounts

    Testing access controls – heart of accounting information integrity


     Absence thereof allows manipulation of invoices (i.e., fraud)
     Access controls are system-wide and application-specific
     Access controls are dependent on effective controls in operating system, networks, and
    databases

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