During your audit of the December 31, 2021, you conduct testing on the revenue and collection cycle.
Question:
During your audit of the December 31, 2021, you conduct testing on the revenue and collection cycle. There are several misstatements in this cycle, but of course you don’t know that before the audit begins. For each of the misstatements listed below, identify a) one affected account and the management assertion violated, b) a specific internal control activity/procedure the client could implement to prevent this misstatement from occurring in the future, and c) a specific substantive audit procedure the auditor could perform that would detect the misstatement.
1. Sales were shipped on January 3, 2022 and were recorded as sales on December 31, 2021.
a. Account & Assertion:
b. Control Activity:
c. Substantive Audit Procedure:
2. Some sales transactions were not recorded.
a. Account & Assertion:
b. Control Activity:
c. Substantive Audit Procedure:
3. Collections from customers received on December 31, 2021, were not recorded until January 3, 2022.
a. Account & Assertion:
b. Control Activity:
c. Substantive Audit Procedure:
4. The company sold to a customer without considering the customer’s recent bankruptcy.
a. Account & Assertion:
b. Control Activity:
c. Substantive Audit Procedure:
5. The employee who opens the mail embezzled customer checks instead of sending them to the cashier for deposit.
a. Account & Assertion:
b. Control Activity:
c. Substantive Audit Procedure:
Expert Answer:
1 Assertion Assertions involved in this category will be completeness cutoff Control Activities In this scenario risk assessment and the control envir... View the full answer
