AUDIT AND ASSURANCE

DPA 5043
RAHAYU BT HASSAN
REVENUE
AND
EXPENSES
 GROUP MEMBERS :
PAVITRA A/P B.MOHAN(06DAT15F2015)
SHOBA A/P SERIDARAN (06DAT15F2025)
SHUBASHINI A/P SEVARAM(06DAT15F2045)
LISANTHINI A/P VASUDEVAN(06DAT15F2060)
 REVENUE
Revenue is increase in asset or decrease in
liability cause by the provision of service or
product to customers.
 PURPOSE OF AUDITING
THE REVENUE
ORDER ENTRY - Acceptance of customer
orders for goods and services into the system
in accordance with managemaent criteria and
policies.
CREDIT AUTHORISATION – Appropriate
approval of customer orders for credit
worthinners.
SHIPPING - Shipping of delivery of goods
that has been authorised.

CASH RECEIPT- Processing of the receipt of

cash from customers.
 Evidence for revenue
a) Sales of goods and services.
• Receiving and recording customers orders
• Authorising credit terms and shipment
• Confirming orders
• Executing shipping orders for goods or work
orders for the performance of service
• Recording the shipments or services performed
 b)Payments received for goods and services

• Receiving the cash and depositing in the

bank cash
• Comparing amounts remmited with
recorded amounts
• Authorising discounts and allowences
• Recording cash receipt ,discounts and
allowence
c)Goods returned by claims received from customers

• Receiving and accepting goods and claims

• Preparing receiving reports
• Reviewing claims
• Authorising credit
• Preparing and mailing credit memo
• Recording returns and claims
Cash Receipt Customer sales
journal order

Sample Cash Receipt Journal

store sales
sales invoice Sales journal
 Credit Shipping
memorandum documents
 Audit objective
and assertion
 OCCURANCE -All revenue and cash receipt
transaction and events that have been
recorded have accurate and pertain to the
entity.

COMPLETENESS –All revenue and cash

receipt transaction and events that should
have been recorded.
ACCURACY – Amounts and other data
relating to the recorded revenue and cash
receipt transaction and events have been
recorded appropriateiy.

CUTOFF-All revenue and cash receipt

transaction and events have been recorded
in the correct accounting period.
1)Authorisation-all-are pre-approved by
responsible personnel
2)Validity
3)Physical safeguards and security
4)Error handing
5)Segregation of duties
 Audit test for
revenue
 Analytical procedures – Consits of absolute
comparisons of dollar balances with prior
year’s account balances or with budget ,ratio
comparisons and trend analysis, and
computation based on financial or operational
or data designed to predict the balance in a
general ledger account.

 Substantive procedures-Material classes of transaction,account

balances,and disclosures always required to obtain sufficient competent
audit evidence due the limitation of internal control and the subjective
nature of auditor’s judgement when making risk assessments regarding
the entity and enviroment.
 TEST OF BALANCES- Physical examination of assets,
confirmation of accounts balance,observation of the
work of clients personnel.

 EVALUATING THE COMPLETENESS ASSERTION-Tests

of balances or analytical procedures canbe
performed to efficiently verify the completeness
assertions,test of controls are not necessary for thi
purposed.
 EXPENDITURE
 Payment in cash or cheque ,or the incurrence
of a liability by an entity, in exchange for
goods or services.
 Purpose of auditing
expenditre
To evaluate the expenses to make sure they are
necessery and in line with internal policies.
To confirmation that expenditure is incurred for
the purpose for which grant.
Ensure that expenditures confirm to relevant
provision of constituition/law/rules/ragulations.
Whether various project &their operations are
executed economically.
Requisitioning Purchasing Receiving

Account Disbursem Invoice

Payable ent processing
Evidence for expenditure
component

Request goods or service

for an authorised individual
Or department.
purchase order

All about information on goods

and services being purchased.

Supplier invoice
 Bill from supplier.
 Description and quantity
of the goods or services
provided.
voucher

To control payment

cheque  Sign by an authorised

individual.
 To make payments for
goods &services
Assertions Test of control Substantive test
Existence Examine sales invoice for An auditor is concerned with
supporting bill of lading and 3 types of misstatements:
customer order a)Recorded sale with no
shipments-trace from sales
journal entry to shipping
document
b)Sales recorded more than
once check cancellation of
shipping documention
c)Shipment made to non
existent customer person
recording sales should not
authorised shipments
Assertions Test of control Substantive test

Completeness Account for Many audits ignores

sequence of completeness on the ground
shipping that overstatement of
documents income is greater
concern.However errors may
still misstate financial
statements.One effective
procedure is to trace from
shipping documents to the
sales invoice and entry in
sales journal
Assertions Test of control Substantive test

Accurancy Examine the Start with entries in sales

approved price journal and compare the
list for accurancy total of selected transaction
and proper with accounts receivable
authorisation master file entries and
duplicate sales invoices.
Assertions Test of control Substantive test

Classification Examine When there are cash and

documents credit sales,it is important
package for not to debit accounts
duplicate receivable for a cash sales
verification for collection of a
receivable.Its also important
not to classify sales of
operating assets as
sales.Common procedure is
to examine duplicate sales
invoices for proper account
classification
Assertions Test of control Substantive test

Timing Account for Sales should be billed when

sequence of ownership is transferred to
shipping the customer
documents A common procedure is to
compare the date on the
duplicate sales invoice and
bill of lading
Posting and Examine Use audit software to foot
summarisation evidence that the sales journal and trace
account totals to general ledger
receivable
master file is
reconciled to
general ledger
 Audit test for
expenses
 Audit certify that an organization is using it’s money
fairly ,accurately and that no fraud or cheating is
occuring.
 If money is being spent,audits confirm that work or
materials were actually purchased,and reasonable price.
 Audits also verify that the amount listed includes all
involved costs.
 Accuracy is important in the adding and subtracing the
entries.
 Organization records should match bank records.
 Full and fair disclosure keeps the economy safe.
 AUDIT OBJECTIVE
AND ASSERTION
 OCCURANCE-All purchase and cash disbursement
transactions and events that have been recorded have
accurate and pertain to the entity.
 COMPLETENESS-All purchase and cash disbursement
transaction and eventsthat should have been recorded .
ACCURACY-Amounts and other data relating to the
recorded purchase and cash disbursement transaction
and events have been recorded appropriateiy.
 CUTOFF-All purchase and cash disbursement
transactions and events have been recorded in the
correct accounting period.
 CUSTOMER ORDER
A customer order is a request for
merchandise by a customer.
May be received by telephone, letter, a
printed form that has been sent to
prospective and existing customers between
the supplier and customer.
 DELIVERY ORDER
A delivery order is a document from a
Consignee, or an owner or his agent of
freight Carrier which orders the release of
the transportation of cargo to another party.
 SHIPPING DOCUMENT
The shipping document serves as a signal to
bill the customer and may be in electronic or
paper form.
Which is a written contract between the
carrier and the seller of the receipt and
shipment of goods.
 PURCHASE INVOICE
A purchase invoice can be used to prove that
something was bought and how much was
paid for it.
A commercial document or bill presented to
a buyer by a seller or service provider for
payment within a stated time frame that
indicates what has been purchased, in what
amount and for what price.
 SALES INVOICE
The sales invoice is the method of indicating
to the customer the amount of a sale and the
payment due date.
The computer calculates the invoice
extensions and total sales amount using the
information entered, along with prices in the
inventory master file.
 CASH RECEIPTS
Cash Receipt simply means receiving cash
from some source. The source could be
anything, a customer paying for the credit
purchases, a person paying you rent for using
your equipment, interest received on
investments, additional funds brought in by
the owner to expand the business etc.
 OFFICIAL RECEIPT
Official receipts are hard copies of financial
transactions used by businesses for tax and
accounting purposes. These documents
include the vendor’s name, goods sold,
purchase price, the date, receipt number and
other pertinent information.