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Auditing Revenue and Related Accounts

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CHAPTER

10
Auditing Revenue and
Related Accounts

1 Explain the concept of accounting cycles and their impact on audit approaches, and identify the accounts in the revenue cycle.
2 Discuss the importance of proper revenue recognition and the characteristics of revenuerelated fraud.
3 Describe the major types of fraud and misstatements that have occurred in the revenue accounts.
4 Describe how to use analytical procedures to identify possible misstatements in the revenue cycle. 5 Assess inherent and control risk regarding revenue cycle accounts.
6 Use audit procedures to test the effectiveness of controls in the revenue cycle.
7 Link the auditor’s control risk assessment to the development of substantive tests of accounts in the revenue cycle.
8 Describe the factors that influence the effectiveness and efficiency of audits of account balances. 9 Apply auditing concepts to test revenue.
10 Apply auditing concepts to test accounts receivable.
11 Describe fraud indicators in the revenue cycle and related audit procedures.
12 Evaluate the adequacy of a client’s allowance for doubtful accounts.

Th om so n LEARNING OBJECTIVES

Le ar ni ng ™

The overriding objective of this textbook is to build a foundation to analyze current professional issues and adapt audit approaches to business and economic complexities. Through studying this chapter, you will be able to:

CHAPTER OVERVIEW

This chapter illustrates the audit concepts developed in Chapters 4 through 9 by applying them to the accounts in the revenue cycle. Sales transactions are always material to a company’s financial statements and often are subject to manipulation. Many audit failures have been characterized by misstatement of sales. Because sales are often subject to misstatement, special attention is paid to the control environment and to management’s motivation to…...

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