Question

Assume you are performing an operational audit of the cycle assigned to your group in the class project (e.g, Expenditure) ... and not necessarily of our exact company, but a Revenue, Expenditure cycle in general

What suggestions or questions specific to that cycle would you be investigating?

Answer 1

Revenue Cycle:

• The sales should be recognized only when the goods are shipped/delivered as per the terms of the contract (FOB/CIF).
• The revenue related to service should be recognized when the service is provided.
• The supporting documentation such as purchase order from customer, invoices.
• The transactions should relate the accounting year.
• All the sales transactions should be properly journalized and posted.
• The valuation of the sales.
• If there is any pressure on the employees to meet the sales target.
• The authorization of the transactions.
• The historical trends
• The amount of credit sales and uncollectible bad debt expense.