Develop the Audit Program – Revenues and COGS Ref.
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Client: ORION HANEL PICTURE TUBE CO LTD Audit date: 31 Dec 2002
Financial Statement Assertions
Audit Objectives: E/O C R& V/M P&D
O
All sales included in the income statement represent the exchange of goods or
services with customers for cash or other consideration during the period. All
other revenues included in the income statement for the period have accrued to
the entity at the balance sheet date. Revenues applicable to future periods have
been deferred.
All sales and other revenues that accrued to the entity during the period are
included in the income statement.
Sales and other revenues are stated in the income statement at the appropriate
amounts.
Sales and other revenues are properly classified, described, and disclosed in the
financial statements, including notes, in conformity with prescribed accounting
principles.
Assertions:
Existence or Occurrence, Completeness, Rights and Obligations, Valuation or Measurement, Presentation and Disclosure
Audit Procedures to Consider
Assertions Auditor
addressed Check if
by the item is W/P Sign-
procedure applicable Ref. Off
All 1. Obtain or prepare a comparative analysis of sales (by product
line, location, etc.) and other income accounts for the current and
preceding year and obtain explanations from the client for
accounts that changed by the greater of TE or %.
All 2. Review sales activity by month/quarter for unusual fluctuations
(consider breakdown by product line or location, if available).
Consider comparison to prior year's amounts.
O, C, V 3. Perform additional analytical review procedures, as follows:
a) If not performed as Accounts Receivable step #5, compare
discounts, returns, and allowances with prior year (or % of
sales).
b) Compare actual revenues to budgeted revenues and obtain
explanations for major variances — can be done in
connection with Costs and Expenses step #2a.
c)
O, C, V 4. If not performed as Accounts Receivable step #9, review the
accounts receivable and sales accounts in the general ledger and
the sales and cash receipts journals for unusual items. Investigate
any unusual items observed.
All 5. Select 20 sales transactions from throughout the year and support
proper recording by comparing sales invoice information to
shipping documents and tracing the invoice through the
accounting system to recording in the general ledger.
All 6. Select 20 shipment transactions from the shipping records from
throughout the year and support proper recording by comparing
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E&Y SMALL BUSINESS DOCUMENTATION Prepared by:
SB-19l (12-00) Develop the Audit Program - Revenues Reviewed by:
Develop the Audit Program - Revenues Ref.:
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Assertions Auditor
addressed Check if
by the item is W/P Sign-
procedure applicable Ref. Off
information from the shipping documents to invoices and tracing
invoice information through the accounting system to recording
in the general ledger.
C 7. Check the numerical sequence of sales invoices and/or shipping
documents for completeness.
C, V, P&D 8. Test the clerical accuracy of the sales journal for 2 months during
the year and trace totals to proper posting in the general ledger.
See A/R 9. Refer to Accounts Receivable for the procedures relating to tests
program
of cutoff of sales invoices and credit memos.
O, C, V 10. Review the other non-current credit accounts in the general
ledger for unusual items. Examine support for the charges to
these accounts during the year.
See 11. Refer to Investments for the procedures relating to tests of
Investments
program
interest and dividend income and related accrual accounts, and
equity in earnings (losses) of investees.
See 12. Refer to Investments for testing of gains and losses from the sales
Investments
program of investments and securities recorded during the year.
13.
14.
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E&Y SMALL BUSINESS DOCUMENTATION Prepared by:
SB-19l (12-00) Develop the Audit Program - Revenues Reviewed by:
