AP - Revenue

What are the general audit risk for revenue

• Revenue has declined by %% and mark up on cost has declined from %% to %% is out of line with the company's policy of %% mark-up.
• In addition, Gross Profit Margin has decrease from %% to %% which is inconsistent with the %% mark-up policy/due to
• PBTM improved from %% to %%
• Revenue has increased by %% which is inconsistent with the %% increase in __(q)(Eg number of gyms)
• Revenue per gym/outlet has increased from X to X

What are the general audit procedure used for Revenue

• Evaluate and test the operating effectiveness of controls over cash sales/ revenue recording
• On a sample basis, vouch entries in the sales ledger to invoices to ensure occurrence
• Review budgets/forecasts for the year to ascertain if revenue is higher than expected
• Reviews post year end management accounts to ascertain if sales are abnormally low
• Test the accuracy of the integration between the e-commerce system and the sales accounting system

What are the general audit procedure used for Revenue

• Enquire management on the increase or decline in revenue and consider its reasonableness
• Compare monthly sales to identify anomalies
• Trace good despatch notes into sales ledger for completeness
• Test the accuracy of the integration between the e-commerce system and the sales accounting system
• Reconcile sales ledger to electronic sales system

What are the general audit procedure used for Revenue

• Perform 3 way matching from sales order to invoices/ despatch notes to salesa ledger
• Obtain detailed breakdown of each offices to identify anomalies compared to the prior year
• Trace the receipts into the bank statements (cash basis)
• Test the accuracy of the integration between the e-commerce system and the sales accounting system
• Reconcile sales ledger to electronic sales system

What are the audit risk if orders are placed over the internet

• Unreliable internet sale system would result errors in recording
• E-commerce system is integrated with the sales accounting system and any errors in the integration may lead to errors in FS
• Early recognition of revenue
• increase in chance of manipulation by overstatement of assets and understatement of liabilities
• Increase in control risk due to lack of maintenance as errors made by employees may go undetected

What are the audit procedure for the risk of online orders

• Use CAATs to test the operating efficiency of the sales system
• Reconcile sales ledger to electronic sales system
• Test the accuracy of the integration between the e-commerce system and the sales accounting system
• Trace good despatch notes into sales ledger for completeness
• On a sample basis, vouch entries in the sales ledger to invoices to ensure occurrence

What are the audit risk if receive deposit with the order (payment in advance)

• The appropriate amount should be included would be PXXX (….....). There is an overstatement of PXXX
• Cut-off errors as the membership (any events) last for 12 months and they may span over 2 different accounting periods [can be used for deferred revenue issue]
• Early recognition of revenue
• The balance of PZZZ should be capitalized as deferred revenue
• Increase in control risk due to lack of maintenance as errors made by employees may go undetected

What are the audit procedure for the risk of payment in advance

• Discuss with management on income recognition policies and evaluate its reasonableness
• Agree the cash receipt to bank statement
• Ensure advance payment are capitalised into deferred revenue
• Obtain despatch notes around the year and match to its corresponding invoices and ensure they are accrued into the correct accounting period
• Perform sales cut-off test by taking the proceeds received after the year end and all “sales relating to before year end is accrued into the FS and to ensure that sales are recorded into the correct accounting periods

What is the audit risk of there is a change in the system during the year

• Corruption of data during the migration
• No parallel run on the new system to tests its operating effectiveness which resulted in cases where monthly subscriptions were paid twice by customers
• Inadequate training provided to staff involved increases the chance of errors in recording
• Unreliable apps system would results in errors in recording as the records are based on records from the app
• E-commerce system is integrated with the sales accounting system and any errors in the integration may lead to errors in FS

What are the audit procedure for risk of system change during the year

• Use CAATs to test the operating effectiveness of the new system
• Enquire with staff on the functionality of the new system
• Evaluate the integrity of the apps by using dummy data
• Enquire management if a parallel run was conducted and read the report to ascertain any issues identified during the changeover and how it was resolved
• Agree the cash receipt to bank statement