ACT575 M5 Option 2

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School
Colorado State University, Fort Collins **We aren't endorsed by this school
Course
ACT 575
Subject
Accounting
Date
Oct 29, 2023
Pages
6
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1 Module 5: Cash Audit Olga Lisser Colorado State University Global ACT575: Advanced Auditing and Assurance Services Dr. Kuhn 10-15-2023
2 This paper defines analytical procedures and substantive procedures for the audit of cash and revenue. This essay also describes common errors that are usually found during audit of cash and revenue accounts. Finding the errors in the sample is the auditors' aim when they conduct a substantive test of accounting transactions and account balances. Analytic procedures in the audit process include evaluating financial data by investigating plausible relationships between financial and nonfinancial data. Analytic techniques range from simple comparisons to the use of intricate models with numerous relationships and data elements. (PCAOB). Analytical procedures compare recorded amounts or ratios derived from recorded amounts to auditor-developed hypotheses. These relationships should typically hold overtime (PCAOB). If not, it could mean that the financial records are inaccurate, possibly due to errors or fraudulent reporting. The auditor develops these expectations by identifying and utilizing plausible relationships that are reasonably expected to exist based on the auditor's knowledge of the client and the sector in which the client operates. Analysis techniques are employed to identify potential problems with a client's financial records. It entails comparing various sets of financial and operational data to determine whether the historical relationships have persisted into the review period. If these connections do not hold over time, the financial records are typically inaccurate because of mistakes or fraudulent reporting activity.
3 Examining audit procedures for deferred revenue, revenue analytics examples, and analytical procedures in audit planning are crucial when discussing examples of analytical procedures related to revenue accounts. Analytical procedures include the following steps: · Compare the day's sales to the amount for prior years. The amount should remain about the same over that time. Unless there is a change in customer base, sales amount and collection practices should remain almost the same. · Comparing the ending balances in the bank account to the total amount of receipts issued to customers recorded in the cash book at hand. · Comparing the total cash banked to the total cash sales on cash books through inventory taking. The method or audit tests known as substantive procedures are those that an auditor develops to assess the company's financial statements, and which call for the auditor to produce proof that the financial records of the company are complete, accurate, present, occurring, measured, and valued in accordance with the audit assertions. It is used to calculate the company's financial statements and to analyze the completeness, accuracy, existence, occurrence, measurement, and valuation of the business's financial records. Test of details and substantive analytical procedures are the two types of substantive procedures. To gather proof of the business transaction's occurrence, validity, and existence, substantive audit procedures are used. Additionally, the validity of the accounting treatment can be examined.
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