Question

identify and test controls for cash

identify and test controls for the revenue and collection cycles

Answer 1

Test of cash is an audit producer whuch is use by auditor to test the effectiveness of a control used by any Client to prevent misstatement . Depending upon the result of the test auditor may rely on the effectiveness of test which is used by his Client, if he found that controlls are weak in that case the auditor may enhance their use of substensiv testing which will ultimately increse the cost of test.

A auditor to try to assess the inherent risk which is associated with the revenue cycle and then perform test to ensure it should be free of errors and fraud such kind if error are occurred due to cutoff date of sales and under the pressure of management to misstatement revenue .In such case a auditors may provide some assurance that how the revenue of the company can record more accurately

Recignition of isses -First o all the audito try to find out all the isues related to the sales or sales return an consignment related issues he also try to find out is there any misstate in revenue wich may occur due to th presure of management or to impres top management.Apart from this issue there may be some common issues like recording of transaction or any mistake in amount etc.

Analytical procedures-Analytical procedure include running various financial ratios and comparing these ratios to industry benchmark.In this process the auditor examine the gross profit margin and the amou of growthwhic a company experienced in one year .He also try to calculate all the expenditure ofthe company and he ensure that it should not be more than the revenue of the cmpany otherwise company may from cash crises in future.

Test of controls -It is most important part of internal contoll of an organization .In test of control the auditor examine all the person who approved credit sales shipping and recording sales orders etc.

Sustantive test- These test include the checking the trail balance , receivable amout , bills of payments thay also include sales ,sales return and cash receipts .He examine all the related documents to determine accuracy .