Assertions
This assertion tests whether recorded sales actually occurred.
Occurance
This control separates authorization, custody, and recordkeeping responsibilities.
Segregation of Duties
This procedure starts with recorded sales and examines supporting source documents.
Vouching
This standard establishes the five step revenue recognition model.
ASC 606
These are sales recorded even though they never happened.
Fictitious sales
This assertion checks whether all valid sales are recorded.
Completeness
This control requires approval before extending credit to a customer.
This procedure follows shipping documents into the sales journal.
Tracing
Revenue is generally recognized when or as this transfers to the customer.
Control of promised goods or services.
This occurs when revenue is recognized before the performance obligation is satisfied.
Premature revenue recognition
Sales recorded in the wrong accounting period violate this assertion.
Cutoff
This control compares sales orders, shipping documents, and invoices.
Document matching
This procedure checks the arithmetic accuracy of an invoice.
Recalculation
Control of goods transfers January 6th, after a December 29th contract signing. Revenue belongs in this month.
January
This involves pushing excessive products into distribution channels to boost reported sales.
Channel stuffing
Fictitious accounts receivable balances violate this account balance assertion.
Existence
This control compares detailed customer balances to the general ledger.
Receivable reconciliation
This procedure obtains evidence directly from customers about receivable balances.
Receivable confirmations
Step 3 of ASC 606.
Transaction Price
This company was involved in a 2017 SEC revenue recongition case concerning backdating and premature revenue.
Osiris Therapeutics
An understated allowance for credit losses primarily threatens this assertion.
Valuation
This control requires someone independent to examine unusual transactions and adjustments.
Independent review
Cutoff testing
Step 2 of ASC 606.
Identifying performance obligations
In a 2020 SEC case, Super Microcomputer recognized revenue on products sent to these locations before customer delivery.
Warehouses