Chapter 11 Slides.pptx-Chapter 11 Accoun...
Chapter_11_Slides.pptx-Chapter 11 Accounts Receivable, Notes Receivable,
Showing 7-13 out of 31
Chapter 11 Slides.pptx-Chapter 11 Accounts Receiva...
Chapter_11_Slides.pptx-Chapter 11 Accounts Receivable, Notes Receivable,
Chapter 11 Slides.pptx-Chapter 11 A...
Chapter_11_Slides.pptx-Chapter 11 Accounts Receivable, Notes Receivable,
Page 7
Internal Control over A/R and Revenue
Control Activities
Prepare sales order
Approve credit
Issue merchandise from stock
Invoice verification
Maintenance of control accounts
Maintenance of customers’ ledgers
Approval of sales returns and allowances
Authorization of write-offs of uncollectible accounts
Monitoring Controls
©McGraw-Hill Education.

Page 8
Revenue Cycle—Documents
Customer purchasing--Purchase order
Sales--Sales order
Shipping--Bill of lading
Receiving cash receipts--Control listing
Authorizing adjustments to accounts
receivable--Credit memo
©McGraw-Hill Education.

Page 9
Credit Sales System Flowchart Figure
©McGraw-Hill Education.

Page 10
Internal Control over
Notes Receivable
Subdivision of duties
The custodian of notes receivable should not
have access to cash or to the general
accounting records
The acceptance and renewal of notes are
authorized in writing by a responsible official
who does not have custody of notes
The write-off of defaulted notes are approved
in writing by responsible officials and effective
procedures adopted for subsequent follow-up
of such defaulted notes
©McGraw-Hill Education.

Page 11
Risk Assessment for the Audit
of Receivables
A. Use the understanding of the client
and its environment to consider
inherent risks, including fraud risks,
related to receivables and revenue.
B. Obtain an understanding of internal
control over receivables and revenue.
C. Assess the risks of material
misstatement and design further audit
©McGraw-Hill Education.

Page 12
Details on Understanding
the Client Business
The types of products and services sold.
The classes and categories of the client’s customers.
Whether the business is affected by seasonal or
cyclical demand.
Typical marketing policies for the client and its
Policies regarding pricing, sales returns, discounts,
extension of credit, and normal delivery and
payment terms.
Compensation arrangements that are based on
recorded revenue.
Typical revenue recognition principles used in the
industry and their methods of application.
©McGraw-Hill Education.

Page 13
Fraud Risk related to Receivables
and Revenue
Understand controls established by
management to control risks
Determine controls have been
Response to risks
An overall effect on audit
Alter the design of audit procedures
Performing procedures to address risk of
material misstatement due to management
override of internal control
©McGraw-Hill Education.

Ace your assessments! Get Better Grades
Browse thousands of Study Materials & Solutions from your Favorite Schools
California State Universi...
Great resource for chem class. Had all the past labs and assignments
Leland P.
Santa Clara University
Introducing Study Plan
Using AI Tools to Help you understand and remember your course concepts better and faster than any other resource.
Find the best videos to learn every concept in that course from Youtube and Tiktok without searching.
Save All Relavent Videos & Materials and access anytime and anywhere
Prepare Smart and Guarantee better grades

Students also viewed documents