Page 10 - eBook Audit Of Financial Statement Components

The process of delivering and billing to customers involves

documents such as shipping documents for a delivery and
invoice for billing of sales. Journals, accounts and statements

are involved in the recording process and receipts are

documents used in sales and account receivable collections.

For each process in the revenue cycle, some controls should

be put in place by the companies to mitigate any frauds or

misstatements in the financial statements. Auditors should
Tests of
assess whether such controls are working effectively to controls focus
mitigate misstatements in a financial statement assertion. on the
operation of
The control assessments are performed in the test of controls
controls over
after considering results from risk assessments.
sales
transactions

The auditor should design an appropriate audit approach
and recording
based on the assessment of the identified risks at both the process in the

financial statement level and the assertion level. The assessed revenue cycle
rather than on
risks are different between the material classes of
the accuracy of
transactions, account balances and disclosures. Therefore,
sales and
the most appropriate and effective audit approach varies. For receivables

example, tests of controls are more appropriate to test for the amount.

completeness of sales and substantive tests are applicable for

the other assertions.

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