Audit programme – Test of controls substantive tests of.doc

AUDIT PROGRAMME – REVENUE CYCLETEST OF CONTROLS – REVENUE TRANSACTIONSAudit ObjectiveAudit procedureFindingsGeneralValidity (to find out whether there are fictitious sales, or incidences whereby sales is recorded but goods not shipped/services not performed)Observe evaluate proper segregation of duties between:shipping function the order entry billing functions.credit billing functions.Accounts Receivable GL functions.cash receipts Accounts Receivable.Since it not possible for you to observe anything here, think about why the segregation of duties is important.Unauthorised shipments to fictitious customers without going through the billing control procedures ? unrecorded sales transactions theft of goods.Sales can be made to customers who are not creditworthy.Unauthorised shipments can be concealed ? unrecorded sales transactions theft of goods.Cash can be diverted shortage of cash can be covered in the accounting records ? theft.Test 5 sales invoices and look for the relevant authorised sales order shipping document (bill of lading).No exceptions noted.Bill of lading should show references to sales invoice.Review test client procedures for accounting for numerical sequence of sales invoices.Your lecturer is the client. Ask her what are the client procedures in accounting for numerical sequence of sales invoices.Lecturer’s response: Sales invoices are pre-printed with fixed serial numbers. The serial numbers are controlled by the Sales Manager and the Finance Manager so that numbers do not repeat.Reduces the risk of fraudulent sales invoices or ‘missing’ sales invoices that are misused. Review test client procedures for mailing handling complaints about monthly customer statements.Your lecturer is the client. Ask her about this matter.Lecturer’s response: The monthly customer statements are generated from the Accounts Receivable Subsidiary Ledger and sent to the customers by the 1st of the following month. If they complain about a balance, the Acco