Essay on AUDIT PROGRAM DESIGN PART II

2072 Words Dec 25th, 2013 9 Pages
AUDIT PROGRAM DESIGN PART II



Sales and Collection Cycle

The objective in the audit of the sales and collection cycle is to evaluate whether the account balance affected by the cycle are fairly presented in accordance with accounting standards.

There are five classes of transactions in the sales and collection cycle.
• Sales
• Cash Receipts
• Sales returns and allowances
• Write-off of uncollectible accounts
• Estimate of bad debt expense
(Arens, 2012, p.442)

The Key control activities are proper segregation of duties, authorization, documentation and recording, preparation of monthly statements and internal verification procedures.

With the exception of cash sales, every transaction and amount is
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Analytical Procedures

Because analytical procedures are substantive tests, they reduce the extent to which the auditor needs to perform detailed tests of balances, if the analytical procedure results are favorable. Our audit team performs analytical procedures for the entire sales and collection cycle, not just accounts receivable. When we perform analytical procedures for sales, we obtain evidence about both sales and accounts receivable. We propose the following analytical procedures for Sales and Collections:

Analytical Procedure Possible Misstatement…