COMPLETING THE TESTS IN THE SALES AND COLLECTION CYCLE ACCOUNTS RECEIVABLE When more sn’ t better Arens. Loebbecke; Auditing, 8/E @2000 Prentice hall. Inc
Arens, Loebbecke; Auditing, 8/E ©2000 Prentice Hall, Inc. 15 When More Isn’t Better COMPLETING THE TESTS IN THE SALES AND COLLECTION CYCLE: ACCOUNTS RECEIVABLE
METHODOLOGY FOR DESIGNING TESTS OF DETAILS OF BALANCES In designing tests of details of balances for accounts receivable, it is essential to satisfy each of the nine balances-related audit objectives first discussed in Chapter 6. 飞1. Detail tie-in 2. Existence 飞3. Completeness 4. Accuracy 5. Classification 6. Cutoff 7. Realizable value 8. Rights 9. Presentation Arens, Loebbecke; Auditing, &/E and disclosure @2000 Prentice hall. Inc
Arens, Loebbecke; Auditing, 8/E ©2000 Prentice Hall, Inc. METHODOLOGY FOR DESIGNING TESTS OF DETAILS OF BALANCES In designing tests of details of balances for accounts receivable, it is essential to satisfy each of the nine balances-related audit objectives first discussed in Chapter 6. 1. Detail tie-in 2. Existence 3. Completeness 4. Accuracy 5. Classification 6. Cutoff 7. Realizable value 8. Rights 9. Presentation and disclosure
Phase Set tolerable misstatement and assess inherent risk for accounts receivable A Assess control risk for sales and collection cvcle Arens, Loebbecke; Auditing, &/E @2000 Prentice hall. Inc
Arens, Loebbecke; Auditing, 8/E ©2000 Prentice Hall, Inc. Phase I Set tolerable misstatement and assess inherent risk for accounts receivable Assess control risk for sales and collection cycle
Phase i Design and perform tests of controls and substantive tests of transactions for the sales and collection cycle Arens, Loebbecke; Auditing, &/E @2000 Prentice hall. Inc
Arens, Loebbecke; Auditing, 8/E ©2000 Prentice Hall, Inc. Phase II Design and perform tests of controls and substantive tests of transactions for the sales and collection cycle
Phase nil A Design and perform analytical procedures for accounts receivable balance Design tests of Audit procedures details of accounts Sample size receivable balance to satisfy balance tems to select related audit objectives ImIng Arens. Loebbecke; Auditing, 8/E @2000 Prentice hall. Inc
Arens, Loebbecke; Auditing, 8/E ©2000 Prentice Hall, Inc. Phase III Design and perform analytical procedures for accounts receivable balance Design tests of details of accounts receivable balance to satisfy balancerelated audit objectives Audit procedures Sample size Items to select Timing