Bus 426 - Chapter 14

4 Pages
Unlock Document

Business Administration
BUS 426
Michael Favere- Marchesi

Chapter 14 -Audit of the Sales and Collection Cycle Typical Sales Cycle Typical Sales Accounts  Sales  Sales returns and allowances  Bad-debt expense  Cash discounts taken  Trade accounts receivable  Allowance for uncollectible accounts  Cash in Bank Chapter 14 -Audit of the Sales and Collection Cycle  Classes of Transactions in the Sales and Collection Cycle  There are 5 in this cycle: o Sales o Cash Receipts o Sales returns and allowances o Charge-off of uncollectible accounts o Bad-debt expense Nature of the Sales and Collection Cycle  Sales and Collection Cycle: Involves the decisions and processes necessary for the transfer of the ownership of goods and services to customer after they are made available for sale  Information in this cycle is divided into two types o Semi-Permanent Data: Also called master file data, is established when a customer started purchasing, and it is updated as customer information changes o Transaction Information: Based on customer activity, and there is normally one transaction for each activity, such as a sale or cash payment  Information can be processed in two ways:  Batch Processing: Transaction processing using groups of transactions  Online Processing: The processing of transactions one at a time with an immediate update against the data files Business Functions in the Cycle and Related Documents and Records  Business Functions in S&C Cycle: The key activities that an organization must complete to execute and record business transactions o Granting Credit: Approves credit to the customer for sales on account o Remittance Advice: A document that accompanies the sales invoice mailed to the customer; meant to be returned to the seller with the payment Sales Cycle Audit Planning Risk Assessment and the Sales Cycle o Client business risk o Audit risk o Inherent risk o Risk of material misstatement o Risk of fraud o Identify significant risks Chapter 14 -Audit of the Sales and Collection Cycle Methodology for Designing Test of Controls for Sales  Understand General Controls – Sales Understand Internal Control and Evaluate Design Effectiveness – Sales Assess planned control risk, identify and assess risks of material misstatements – Sales Evaluate cost-benefit of testing Controls
More Less

Related notes for BUS 426

Log In


Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.