1. Auditing siklus pendapatan dan penerimaan kas PERTEMUAN XI
Dr Rilla Gantino, SE., AK., MM
MM-FEB

2. KEMAMPUAN AKHIR YANG DIHARAPKAN
Mahasiswa mampu menjelaskan dan menerapkan auditing siklus pendapatan dan penerimaan kas

3. MODERN AUDITING 7th Edition
William C. Boynton
California Polytechnic State University at San Luis Obispo
Raymond N. Johnson
Portland State University
Walter G. Kell
University of Michigan
Developed by:
Gregory K. Lowry, MBA, CPA
Saint Paul’s College
John Wiley & Sons, Inc.

4. CHAPTER 14 AUDITING THE REVENUE CYCLE
Nature of the Revenue Cycle
Control Activities — Credit Sales Transactions
Control Activities — Cash Receipts Transactions
Control Activities — Sales Adjustment Transactions
Substantive Tests of Accounts Receivable
Value-Added Services

5. Nature of the Revenue Cycle
An entity’s revenue cycle consists of activities related to the exchange of goods and services with customers and to the collection of the revenue in cash.
For a merchandising company, the classes of transactions in the revenue cycle include:
1. credit sales (sales made on accounts),
2. cash receipts (collections on accounts and cash sales), and
3. sales adjustments (discounts, sales returns and allowances, and uncollectable accounts [provisions and writeoffs]).

6. The Revenue Cycle Figure 14-1

7. Nature of the Revenue Cycle
Understanding the Client’s Business and Industry
Auditors develop audit strategy based on the risk of material misstatement. The first step in assessing risk is obtaining an understanding of the client’s business and industry because it assists the auditor in:
1. Developing an expectation of total revenues by understanding the client’s capacity, market place, and clients.
2. Developing an expectation of gross margin by understanding the client’s market share and competitive advantage in the market place.
3. Developing an expectation of net receivables based on the average collection period for the client and industry.

8. Selected Specific Audit Objectives for the Revenue Cycle Figure 14-2

11. Nature of the Revenue Cycle
Materiality
Revenues are a measure of volume of activity for virtually every entity. Revenues usually have a high volume of transactions and total revenues are so important to the financial statements that they are often used as a gauge of overall materiality for the engagement. Revenues also give rise to accounts receivable and eventually cash and cash flow from operations. The accounts receivable produced by credit sales transactions are almost always material to the balance sheet.

12. Nature of the Revenue Cycle
The transaction classes and account balances comprising the revenue cycle normally have material effects on the financial statements. To enhance the auditor’s effectiveness and efficiency in meeting specific audit objectives in this cycle, careful attention should be given to considering inherent risk, analytical procedures risk, and control risk when choosing the audit strategy for each audit objective.

13. Nature of the Revenue Cycle
Inherent Risk
In assessing inherent risk for revenue cycle assertions, the auditor should consider pervasive factors that may affect assertions in several cycles, including the revenue cycle, as well as factors that may pertain only to specific assertions in the revenue cycle. These include factors that might motivate management to misstate revenue cycle assertions, such as:
1. Pressures to overstate revenues in order to report achieving announced revenue or profitability targets or industry norms that were not achieved in reality owing to such factors as global, national, or regional economic conditions, the impact of technological developments on the entity’s competitiveness, or poor management.

14. Nature of the Revenue Cycle
2. Pressures to overstate cash and gross receivables or understate the allowance for doubtful accounts in order to report a higher level of working capital in the face of the need to meet debt covenants.

15. Nature of the Revenue Cycle
Other factors that might contribute to misstatements in revenue cycle assertions include the following:
1. The volume of sales, cash receipts, and sales adjustment transactions is often high, resulting in numerous opportunities for errors to occur.
2. The timing and amount of revenue to be recognized may be contentious owing to factors such as ambiguous accounting standards, the need to make estimates, the complexity of the calculations involved, and purchasers’ rights of return.
3. When receivables are factored with recourse, the correct classification of the transaction as a sale or a borrowing may be contentious.

16. Nature of the Revenue Cycle
4. Receivables may be misclassified as current or noncurrent owing to difficulties in estimating the likelihood of collection within the next year or the source of events on which collection is contingent.
5. Cash receipt transactions generate liquid assets that are particularly susceptible to misappropriation.
6. Sales adjustment transactions may be used to conceal thefts of cash received from customers by overstating discounts, recording fictitious sales returns, or writing off customers’ balances as uncollectable.

17. Nature of the Revenue Cycle
Analytical Procedures Risk
Analytical procedures risk is the element of detection risk that analytical procedures will fail to detect material misstatements. Analytical procedures are cost effective and rely on the auditor’s knowledge of the business and industry. They are not only effective in identifying potential misstatements in the financial statements, but they are also effective in identifying issues that may result in providing value-added services in addition to the audit report.
The first step in performing analytical procedures is obtaining an understanding of total revenues given:
1. the client’s capacity and
2. the client’s market place for those products.

18. Nature of the Revenue Cycle
The auditor should obtain an understanding of the client’s capacity, the maximum volume of sales that it could generate if it fully utilized its facilities and employees to manufacture and deliver products or services. Auditors should be sensitive to the volume of sales that an entity records given its capacity, the number of shifts that an entity operates, and seasonal variations in the industry. It is much more effective to evaluate total revenues against a measure of business activity than comparing current revenues with prior-year revenues.

19. Nature of the Revenue Cycle
One important analytical procedure is understanding the client’s market share, which compares the client’s revenues with total revenues in the market for the client’s product. This is particularly important because companies with dominant market shares often obtain premium gross margins.
Finally, it is important for the auditor to evaluate the client’s accounts receivable turn days, or average collection period, and be able to compare the collection period with industry norms.

20. Analytical Procedures Commonly Used to Audit the Revenue Cycle Figure 14-3

22. Nature of the Revenue Cycle
Control Environment
The control environment consists of several factors that might mitigate several of the inherent risks related to the revenue cycle. In addition, these factors may enhance or negate the effectiveness of other internal control components in controlling the risk of misstatements in revenue cycle assertions.

23. Nature of the Revenue Cycle
Risk Assessment
Management’s risk assessment for financial reporting purposes is similar to the external auditor’s assessment of inherent risk. A conscientious effort on management’s part to identify the kinds of risks related to revenue cycle transactions and balances, together with a commitment to initiate control activities to address those risks, should reduce the risk of misstatements.

24. Nature of the Revenue Cycle
Information and Communication (Accounting System)
Our primary concern with this component pertains to the portion of the accounting system used in processing cycle transactions and balances. An understanding of the revenue accounting system requires knowledge of how:
1. sales are initiated,
2. goods and services are delivered,
3. receivables are recorded,
4. cash is received, and
5. sales adjustments are made, including the methods of data processing and the key documents and records used.

25. Nature of the Revenue Cycle
Monitoring
This component should provide management with feedback as to whether internal control pertaining to revenue cycle transactions and balances are operating as intended. The auditor should obtain an understanding of this feedback and whether management has initiated any corrective actions based on the information received from the monitoring activities. Possibilities include information received from:
1. customers concerning billing errors,
2. regulatory agencies concerning disagreements on revenue recognition policies or related internal control matters, and
3. External auditors concerning reportable conditions or material weaknesses in relevant internal controls found in prior audits.

26. Nature of the Revenue Cycle
Initial Assessments of Control Risk and Preliminary Audit Strategy
The auditor’s procedures to obtain an understanding of the 4 internal control components extend to the design of policies and procedures and whether they have been placed in operation. In the process of obtaining an understanding of these 4 components, the auditor may become aware of additional control activities related to an assertion. However, the procedures performed to obtain an understanding may not extend to determining the effectiveness of such controls. Without evidence about the effectiveness of how internal controls are placed in operation, the auditor’s initial assessment of control risk must be at the maximum.

27. Control Activities — Credit Sales Transactions
Sales orders may be taken over-the-counter, via telephone, mail order, traveling sales representatives, fax, or electronic data interchange. The goods may be picked up by the customer or shipped by the seller. Sales transactions are usually recorded using computer systems that may process transactions in either a real-time or batch processing mode. Control activities over sales transactions should be tailored to these varying circumstances.

28. Control Activities — Credit Sales Transactions
Virtually every company that requires an audit has a computerized accounting system. Recall that there are 2 types of computer controls:
1. General controls that relate to the computer environment and have a pervasive effect on computer applications.
2. Application controls that relate to the individual computerized accounting applications, such as the expenditure cycle.

29. Control Activities — Credit Sales Transactions
Consideration is given to procedures used by the auditor to:
1. obtain and document an understanding of internal control and
2. perform tests of controls used to make a final assessment of control risk for purchase transactions.

30. Control Activities — Credit Sales Transactions
3. Shipping Document. Form used to show the details and date of each shipment. It may be in the form of a bill of lading, which serves as a formal acknowledgment of the receipt of goods for delivery by a freight carrier. Other shipping documents may include a packing slip with details on the items included in a shipment.
4. Sales invoice. Form stating the particulars of a sale, including the amount owed, terms, and date of sale. It is used to bill customers and provides the basis for recording the sale.
5. Authorized price list. Listing or computer master file containing authorized prices for goods offered for sale.

31. Control Activities — Credit Sales Transactions
Common Documents and Records
The numerous documents and records used by large companies in processing credit sales transactions often include the following:
1. Customer order. Request for merchandise by a customer received directly from the customer or through a salesperson. May be a form furnished by the seller or the buyer’s purchase order form.
2. Sales order. Form showing the description, quantity, and other data pertaining to a customer order. It serves as the basis for initiating the transaction and internal processing of the customer order by the seller.

32. Control Activities — Credit Sales Transactions
6. Sales transactions file. Computer file of completed sales transactions. Used to print the sales invoices and sales journal, and update the accounts receivable, inventory, and general ledger master files.
7. Sales journal. Journal listing completed sales transactions.
8. Customer master file. Contains the customer’s shipping and billing information and the customer’s credit limit.

33. Control Activities — Credit Sales Transactions
9. Accounts Receivable master file. Contains information on transactions with, and the balance due from, each customer. Serves as the basis for the accounts receivable subsidiary ledger.
10. Customer monthly statement. Report sent to each customer showing the beginning balance, transactions during the month, and the ending balance.

34. Control Activities — Credit Sales Transactions
Functions
The processing of revenue transactions involves the following revenue functions:
1. Initiating sales. The request by an entity for a sales transaction with another entity, including:
a. Accepting customer orders.
b. Approving credit.

35. Control Activities — Credit Sales Transactions
2. Delivery of goods and services. The physical shipment or delivery of a good or service, including:
a. Filling sales orders.
b. Shipping sales orders.
3. Recording sales. The formal recognition of revenue by an entity, including:
a. Billing customers.
b. Recording sales.

36. Control Activities — Credit Sales Transactions
Obtaining an Understanding and Assessing Control Risk
The auditor should obtain an understanding of the sales cycle that is sufficient to plan the audit. That is, the auditor needs to have a sufficient understanding to be able to:
1. identify the types of potential misstatements,
2. consider factors that affect the risk of material misstatements, and
3. design substantive tests.

37. Control Activities — Credit Sales Transactions
Tests of controls provide the means for determining the effectiveness of such controls. The extent of the auditor’s consideration of factors related to assessing control risk for any given assertion depends on audit strategy.
If the auditor plans to assess control risk at moderate or high, he or she might use the knowledge about the effectiveness of revenue cycle controls obtained while understanding internal control. The auditor might also infer about the effectiveness of programmed controls by evaluating the operating effectiveness of computer general controls and by making inquiries and inspecting documents related to procedures used to follow up on exception reports generated by programmed controls.

38. Control Activities — Credit Sales Transactions
If the auditor plans to assess control risk at low for revenue cycle assertions, he or she will usually have to:
1. Test the effectiveness of general controls.
2. Use computer-assisted audit techniques (CAATs) to evaluate the effectiveness of programmed controls.
3. Test the effectiveness of procedures to follow-up on exceptions identified by programmed controls.

39. Control Activities — Cash Receipts Transactions
Common Documents and Records
Important documents and records used in processing cash receipts include the following:
1. Remittance advice. Document mailed to the customer with the sales invoices to be returned with the payment showing the customer’s name and account number, invoice number, and amount owed.
2. Prelist. Listing of cash receipts received through the mail.
3. Cash count sheets. Listing of cash and checks in a cash register. Used in reconciling total receipts with the total printed by the cash register.

40. Control Activities — Cash Receipts Transactions
4. Daily cash summary. Report showing total over-the-counter and mail receipts received by the cashier for deposit.
5. Validated deposit slip. Listing prepared by the depositor and stamped by the bank showing the date and total of a deposit accepted by the bank and the detail of receipts comprising the deposit.
6. Cash receipts transactions file. Computer file of validated cash receipts transactions accepted for processing; used to update the accounts receivable master file.
7. Cash receipts journal. Journal listing cash receipts from cash sales and collections on accounts receivable.

41. Control Activities — Cash Receipts Transactions
Functions
The cash receipts function, which includes the processing of receipts from cash and credit sales, involves the following subfunctions:
1. Receiving cash receipts
2. Depositing cash in bank
3. Recording the receipts

42. Control Activities — Cash Receipts Transactions
Obtaining an Understanding and Assessing Control Risk
The auditor’s responsibilities and methodology for meeting the requirements of the second standard of fieldwork for cash receipts transactions are the same as described for credit sales transactions. Many control procedures involved in processing cash receipts are manual controls rather than programmed control procedures.

43. Control Activities — Sales Adjustment Transactions
Sales adjustment transactions involve the following:
1. Granting cash discounts
2. Granting sales returns and allowances
3. Determining uncollectable accounts
In many companies, the number and dollar value of these transactions is considerable. Of primary concern is the possibility of fictitious sales adjustment transactions being recorded to conceal irregularities in processing cash receipts.

44. Control Activities — Sales Adjustment Transactions
The auditor performs tests of controls to obtain evidence about the effective design and operation of an entity’s system of internal control. The inherent risk associated with cash receipts transactions is high due to the possibility of employee fraud through the diversion of cash receipts. If analytical procedures show an increase in the number of days that receivables are outstanding, one possible explanation would be the diversion of cash receipts. Due to the inherent risk of misappropriation of cash, and the impact of cash receipts transactions on receivables, the auditor will often test control procedures related to cash receipts.

45. Control Activities — Sales Adjustment Transactions
If the auditor plans to assess control risk as moderate or high, the auditor will likely support the control risk assessment with evidence accumulated while obtaining the understanding of internal control.
If the auditor plans to assess control risk as low, the auditor will expand the extensiveness of tests that include inspection of documents and reperformance of manual controls. If the control objective is achieved through programmed control procedures, the auditor plans a scope of tests that includes tests of:
1. computer general controls,
2. computer application controls, and
3. The effectiveness of manual follow-up procedures.

46. Substantive Tests of Accounts Receivable
Receivables include amounts due from customers, employees, and affiliates on open accounts, notes, and loans, and accrued interest on such balances. Our main consideration is directed at gross receivables due from customers on credit sales transactions and the related contra account, the allowance for uncollectable accounts. The sales that are most likely to represent potential misstatements are the uncollected sales. To design substantive tests for these accounts, the auditor must first determine the acceptable level of tests of details risk for each significant related assertion.

47. Substantive Tests of Accounts Receivable
Determining Detection Risk for Tests of Details
For a specified level of audit risk, tests of details risk is inversely related to the assessed levels of inherent risk, analytical procedures risk, and control risk. Therefore, factors pertaining to these assessments must be considered in determining the acceptable level of tests of details risk for each accounts receivable assertion.

48. Substantive Tests of Accounts Receivable
Pervasive inherent risk factors relating to gross and net receivables as well as the revenue cycle were previously discussed. The combined effects of these factors, especially those contributing to the risk of credit sales being overstated and the allowance for uncollectable accounts being understated, may result, respectively, in high assessments of inherent risk for the existence or occurrence and valuation or allocation assertions for gross accounts receivable and the valuation or allocation assertion for the related allowance account. Even when this is the case, lower inherent risk assessment may be appropriate for the other assertions.

49. Substantive Tests of Accounts Receivable
Control risk assessments for accounts receivable assertions are dependent on the related control risk assessments for the transaction classes (credit sales, cash receipts, and sales adjustments) that affect the accounts receivable balance.

50. Substantive Tests of Accounts Receivable
The appropriate planned assessed levels of inherent risk, analytical procedures risk, and control risk are used in the audit risk model in the planning phase to arrive at the appropriate planned level of tests of details risk and the associated planned level of substantive tests embodied in the preliminary audit strategy for each assertion. If the actual or final assessment differs from the planned assessment, the audit risk model is used again with the actual data to determine a revised acceptable level of tests of details risk and an associated revised level of substantive tests for each assertion. Either the planned levels, if supported, or the revised levels are used in completing the design of appropriate substantive tests.

51. Correlation of Risk Components — Accounts Receivable Assertions Figure 14-8

52. Substantive Tests of Accounts Receivable
Designing Substantive Tests
The next step is to finalize the audit program to achieve the specific audit objective for each category of account balance assertions. The specific objectives addressed are the ones listed in the Account Balance Audit Objectives column of Figure 14-9.

53. Correlation of Risk Components — Accounts Receivable Assertions Figure 14-9

62. Substantive Tests of Accounts Receivable
Confirm Receivables
Confirmation of accounts receivable involves direct written communication between individual customers and the auditor. This substantive test is used extensively by the auditor.

63. Substantive Tests of Accounts Receivable
Generally Accepted Auditing Procedures
The confirmation of receivables is a generally accepted auditing procedure. AU 330, The Confirmation Process (SAS 67), states that there is an presumption that the auditor will request the confirmation of receivables during an audit unless:
1. Accounts receivable are immaterial to the financial statements.
2. The use of confirmations would be ineffective as an audit procedure.

64. Substantive Tests of Accounts Receivable
3. The auditor’s combined assessment of inherent risk and control risk is low and that assessment, in conjunction with evidence expected to be provided by analytical procedures or other substantive tests of details, is sufficient to reduce audit risk to an acceptably low level for the applicable financial statement assertions. In many situations, both confirmation of accounts receivable and other substantive tests of details are necessary to reduce audit risk to an acceptably low level of the applicable financial statement assertions.

65. Substantive Tests of Accounts Receivable
Forms of Confirmation
There are 2 forms of confirmation request:
1. the positive confirmation, which requires the debtor to respond whether or not the balance shown is correct, and
2. the negative confirmation, which requires the debtor to respond only when the balance shown is incorrect.

66. Value-Added Services
Generally accepted auditing standards do not require that the auditor perform value-added services. However, many auditors develop industry specializations so that they can understand industry trends and better identify risks associated with financial statements not presenting fairly financial position, results of operations, or cash flows. The client and its board of directors usually want to take full advantage of the auditor’s knowledge.

67. Value-Added Services
In the process of performing the audit, the auditor may benchmark company performance against others in the industry. The auditor might address, for example, whether:
1. The company is effectively utilizing assets to generate sales based on a ratio of sales to total assets.
2. Receivables are growing faster than sales, thereby consuming valuable cash flows.
3. The company has appropriately addressed risks associated with a changing or maturing market place.
4. The company is bringing successful new product innovations to market and is enjoying a high percentage of revenues from new products, relative to the competition.

68. CHAPTER 14 AUDITING THE REVENUE CYCLE

69. Copyright
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