A4 - Revenue Cycle

Question 1

what is the general rule about segregation of duties?

Answer 1

a person cannot be in charge of both recordkeeping and cash/authorization

Question 2

what are the most common documents to be generated by the revenue cycle?

Answer 2

1. Credit memos
2. Sales invoices

Question 3

what is sale cut-off test used to detect?

Answer 3

1. unrecorded sales (shipments where no invoice has been generated)
2. sales allocated to the wrong period ( like Jan sales included in Dec)

Question 4

what would be beneficial for the auditor to include with the confirmations?

Answer 4

client-prepared statements of accountant that show the details of the account balances

Question 5

what are the two assertions provides primary evidence when confirming AR?

Answer 5

1. Rights and obligations: does the client have a right to the receivables?
2. Existence: does the receivables really exist?