Running head: BUSINESS PROCESS SCOPING 1

Business Process Scoping: The Analysis of Revenue Process Through the Lens of

Control and Risk.

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BUSINESS PROCESS SCOPING 2

The Analysis of Revenue Process Through the Lens of Control and Risk

A company's revenue and collection cycle are a recurring set of business activities and

processing procedures involved with supplying products and services to customers and

collecting money for those sales. A company's cash flow is dependent on the effectiveness of

its sales and collection processes. Auditors are required to conduct a financial audit to

evaluate whether a company's revenue cycle is free of errors or fraud. This cycle's inherent

risk is tied to the cut-off dates for certain sorts of sales and the demands from management to

overstate revenues (Saadullah & Elsayed, 2020). The auditor may give some confidence that

the company's revenues are documented properly by performing so-called substantive tests

and controls tests.

Suprapto & Limbing (2020) explains that refund and return rights, round-trip sales,

consignment sales, gross sales, and bill and hold transactions are the most common causes of

revenue recognition problems. It is common for management to feel the need to exaggerate

sales to attract investors or impress higher-ups in the company. Sometimes it is only a matter

of human mistake and the erroneous income is recorded. A thorough grasp of the company

and the industry in which it works is necessary for an auditor to be able to accurately analyze

the audit is results.

A common part of financial analysis is calculating and comparing different financial

ratios to industry standards. As part of the revenue cycle audit, an auditor looks at gross profit

margin and year-over-year increase. The organization's maximum sales capacity, assuming its

facilities and people are fully employed, should be examined as part of the revenue cycle

audit checklist. The receivables account must also be examined so that it does not overrun

sales. If this is the case, the firm may be considered a credit risk and face future cash flow

issues.
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The journal's revenue cycle is also subjected to substantial testing as part of the audit

process. Suprapto & Limbing (2020) explains that this will aid in the discovery of any

discrepancies or inaccuracies in the revenue cycle accounts or supporting paperwork.

Checking the trial balance, verifying receivable figures with a corporation or individual that

owes The cash, and examining the correctness of the provision for uncollectible accounts are

a few examples of these checks.

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Reference

Saadullah, S. M., & Elsayed, N. (2020). An audit simulation of the substantive procedures in

the revenue process–A teaching case incorporating Bloom’s taxonomy. Journal of

Accounting Education, 52, 100678.

Suprapto, G. D. H., & Limbing, L. P. B. (2020). The Role Of Income Audit As Internal

Control Over Intercontinental Bandung's F&B Revenue Cycle. Ekonomika45, 7(1).