Revenue

Question 1

How to test completeness?

Answer 1

1. Obtain a breakdown of revenue for the period on a monthly basis and discuss any significant differences with management
2. Compare the gross product percentage by product line with the previous year and industry data and discuss any significant differences with management

Question 2

How to test accuracy?

Answer 2

1. For a sample of sales invoices, compare the prices and terms to the authorised price list and terms of trade documentation
2. Test whether discounts have properly applied by recalculating them for sample of invoices
3. Test the correct calculation of tax on a sample of invoices

Question 3

How to test cut off?

Answer 3

1. For a sample of invoices around the year end, inspect the dates and compare the dates of despatch and the dates recorded in the ledger for application of correct cut off
2. For sales returns, select a sample of returns documentation around the year end and trace to the related credit entries
3. Perform analytical procedures on sales returns, comparing the ratio of sales returns to sales

Question 4

How to test occurence?

Answer 4

1. For a sample of sales transactions recorded in the ledger, vouch the sales invoices back to customer orders and despatch documentation