Assume that you have been assigned to the audit of Italian Home Stores, which sells Italian furniture and home furnishings in two retail shops and on a website for online sales. Italian Home Stores’ main customers are interior design consultants, and the majority of their sales in the retail stores are on account. Accounts receivable are material to the overall financial statements.
a. Describe the auditor’s responsibility for fraud detection in the revenue process.
b. Describe how you would design audit procedures with the presumption that fraud could occur in the revenue process.
c. Use the assertions of existence, completeness, and valuation to describe how you would design audit procedures to determine whether the assertions were true for the revenue and accounts receivable process.
d. How will you determine whether you have gathered sufficient evidence for this company’s revenue process?
e. How will you determine whether the evidence you have gathered is appropriate?
f. If Italian Home Stores is a public company, describe the documentation requirements related to the revenue process.