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Bac2664auditing l8 Sales Cycle

Bac2664auditing l8 Sales Cycle

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Published by: sueern on Jun 15, 2009
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AUDITINGBAC2664 (New), BAC2287(Old)
Topic 7, Lecture 8Audit of Sales and CollectionCycle
Audit of Sales and Collection Cycle
Tests of Controls and Substantive Tests of transactions
Nature of the sales and collection cycle
Business function, documents and records
Internal Controls
Objective of audit on sales and accountreceivable
Test on real transaction
Audit tests for uncollectible accounts
Balance confirmation including debtors’balances
Overview of the Sales Cycle
Two classes of transactions (credit sales and cash receipts) are processed by theaccounting system, in different manner.The transactions cycle and classes of transaction for credit cycle includes:4Receiving order from customer – written order, telephone, mail, facsimile5Grant credit – approval from credit department (credit standing, credit limit)6Deliver goods – authority to dispatch/deliver goods to customer 7Billing after satisfactory delivery of goods to customer 8Receive cash – customer settles debts by cheques/cash, within credit termThe sales cycle ends when customer makes payment.In addition, different internal controls are applied to ensure:13Complete processing of transactions14Transactions are processed accurately, and15Only valid transactions are processed.

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