Revenue and collection cycle
The revenue and collection cycle involves a series of activities that businesses follow to generate _____ and collect _____.
What are revenue and payments?
The acquisition and expenditure cycle involves the processes a company uses to purchase _____ and _____, receive them, record the related assets or expenses and liabilities, and pay _____.
What are goods and services; vendors?
Production starts with a _____ forecast, a marketing projection of future sales, which informs the production plan—a schedule balancing demand, costs, and inventory levels.
What is sales?
These are the typical source documents in the revenue and collection process. Name three.
What are: (1.) Customer Purchase Orders or Contracts, (2.) Credit Reports and Files, (3.) Shipping Documents, (4.) Sales Invoices, (5.) Accounts Receivable Records, and (6.) Cash Receipts and Bank Statements?
These are the typical source documents for the acquisition and expenditure cycle. Name two.
What are (1.) purchase requisition, (2.) purchase order, (3.) bill of lading, (4.) receiving report, (5.) vendor's invoice, and (6.) voucher.
These are the typical source documents related to the production cycle / inventory. Name two.
What are (1.) Customer Purchase Orders or Contracts, (2.) Credit Reports and Files, (3.) Shipping Documents (Bill of Lading, Packing Slip), (4.) Sales Invoices, (5.) Accounts Receivable Records, and (6.) Cash Receipts and Bank Statements?
This type of confirmation is sent to customers requesting a response whether they agree with a balance.
What is a positive confirmation?
These are the two significant accounts in the acquisition and expenditure cycle.
What are accounts payable and various expenses?
These are the two significant accounts for the production cycle / inventory.
What are inventory and cost of goods sold?
When auditing revenue, there is a risk that management may overstate revenue by recording fictitious transactions or inflating sales. The overstatement of revenue corresponds to this key audit assertion.
What is occurrence?
Testing controls in the acquisition and expenditure cycle involves these procedures. Name all four.
What are inspecting documents (e.g., voucher packages, receiving reports), tracing transactions, recalculating amounts, and observing processes to verify that controls operate as designed?
Phar-Mor hid losses in _____, manipulating counts and margins over 10 years ($1 billion fraud)
What is inventory?
Auditors use five key procedures to evaluate internal controls. Name all five.
What are (1.) Inquiry, (2.) Observation, (3.) Inspection, (4.) Reperformance, and (5.) Walkthroughs?
Auditing the acquisition and expenditure cycle involves these substantive procedures. Name all five.
What are vouching (to invoices, contracts), tracing (to records), recalculating (depreciation, taxes), inspecting (physical assets, documents), and analytical procedures (expenses)?
In the Phar-Mor fraud, weak _____ (overridden by management) and lax ____ failed to detect fraud; randomized counts and margin tests were needed.
What are controls and skepticism?