Auditing the Receipts and Revenue Cycle

Question 1

What Test of detail would I perform in order to gain comfort over the Completeness of Revenue?

Answer 1

• Request access to the place where they keep all their contracts, whether that is a physical location or a digital drive or folder
• Select haphardly, random contracts and ensure that those contracts are signed
• Inspect the contracts to ensure that the client has also signed them
• Inspect the contract dates to ensure that it relates to revenue of the current financial year
• Inspect the schedule of contracts to ensure the one you selected in on the Schedule

o Select a sample of items to ensrue that the contracts in schedule are being invocies, delivered and recorded in the General Ledger
o Request the Invoices and where relevant the delivery notes for the contracts selected
o Inspect the invoices to ensure that they are being billed to the relevant clients to which the agreement relates
o Inspect the amount on the invoice to ensure that it matches the amount stipluiated in the agreement (recalculate the amount according to the agreement if need be)
o Inspect the Derliverty Notes to ensure that it was signed by the customer to evidence the receipt of the services
o Inspect the General ledger to ensure that the relevant invoice is being recorded
o Inspect the GL amount to ensure that it matches the amount per the invoice

Question 2

What substantive Test of detail procedures would I perform in order to gain comfort over the Occurrence of Revenue?

Answer 2

• Inspect GL and agree the balance to the trial Balance to ensure that the GL is complete
• Select a sample from the GL and request the invoices, Signed delivery notes, contract, detailed ledger showing the invoiced amount and the payment thereof and the bank statement which reflects the payment that was made
• Inspect the the invoice to ensure that the number matches the reference according to the GL
• Inspect the amount on the invoice matches the amount per the GL
• Inspect the Customer per the invoice to ensure it matches the customer per the GL
• Inspect the date of the invoice to ensure that it was included within the correct period
• Inspect the date of the signed delviery note to ensure that the service was delveired within the correct period
• Inspect the delvery notes to ensure that they are signed by the customer
• Inspect the detailed ledger for the invoice that was selected and ensure that it was paid
• Inspect the bank statement for the payment as per the detailed ledger and nesure that the amount is the same
• Ensure that the payment reference realtes to the customers Details
• Inspect the contract of the relevant selected invoices and ensure that the customer per the invoice matches the customer name per the agreement
• Ensure that the amount on the invoice matches the amount stipulated within the agreement (recalulate this amount if need be)
• Inspect the agreement and ensure that it realtes to revenue being incurred in the current financial year
• Inspect the agreement to ensure that it was singed by the Customer