AUDIT OF REVENUE CYCLE

Sharifah Rahimatul Hamizah

Siti Shahtira Binti Talip
Najibah Binti Rabihi

Accounts in the Cycle

Cash
sales

Credit
Sales

Cash/bank a/c
Sales a/c

A/c Receivables
Sales a/c

Sales
Return /
Allowance
s

Sales return a/c

Cash/bank a/c
A/c

Bad
Debts

Bad debts Exp.

Receivables

A/c

Cash
receipt

Sales
(cash &
sales on
account )

Sales
return &
allowance

Classes of
transactio
n

Estimate
of bad
debt
expenses

Charge off
of
uncollecti
ble
account

DOCUMENTS IN THE
BUSINESS
Sales
- Customer order, sales order,
shipping document, sales
invoice, sales journal, al/c
receivables subsidiary ledger,
a/c receivables trial balance

Sales returns &

allowance
-credit memo
- Sales return &
allowances journal

Cash receipt
- Remittance advice
- Prelisting of cash
receipts

Charge off of
uncollectible
accounts
- Write off authorization
-adjusting journal entry
report

Bad debts expenses

- Adjusting journal
entry report

Design & perform

analytical procedure
Year to year
comparisons of
sales, a/c
receivables,
allowance for
doubtful accounts,
bad debt; etc.

Ratio analysis

udit of Account Receivables

Existence & occurrence
a/c receivables exists at the balance sheet
date & that the sales transactions recorded

Completeness
all sales transactions & a/c receivables

that should be recorded in the financial

statement based on the applicable
financial reporting framework are included

- a/c
receivable
s are
valued
correctly
according
to GAAP
rules at
year
end

Rights
- The
company
has the
right to
collect the
accountClassificatio
receivable
n
s balance
- Review
trial balance
to ensure
a/c
receivables
is properly
classifies
under
current

Cutoff
- To verify
whether
transaction
s near the
end of
accounting
period are
recorded in
the proper
period.

Y CONTROL PROCEDURES
SEGREGATION OF DUTIES
- Various department process
revenue transactions & no individual
performs more than one activity in
the business process.
- Important to prevent various types
of intentional & unintentional type of
misstatements.

KEY CONTROL PROCEDURES

Authorization procedures
Sales contracts are
approved by management
Credit sales are approved
by the credit department
Goods are shipped after
credit approval
Price used to prepare sales
invoices come from an
authorized price list.

KEY CONROL PROCEDURES

Documented transaction trails
Prepare a multicopy prenumbered sales
invoice at the time a customer order is
received. Copies are used for different
purpose
approved credit
authorize shipment
record the number of unit shipped
billed customer
used of prenumbering, to prevent :
- The failure to bill @ record sales
- The occurrence of duplicate billings
& recording

KEY CONTROL PROCEDURES

Physical controls that limit access to
assets
To protect the assets of value from
theft
(sales invoices, shipping
documents, cash payments, credit
approval forms. )