UNDERSTANDING INTERNAL CONTROLS
CORE CONCEPTS
18
AUDIT EVIDENCE
19
OPENING BALANCES
20
AUDIT SAMPLING
2 :
APPENDIX 1 :
APPENDIX 2A :
APPENDIX 2B :
APPENDIX 3 :
APPENDIX 4 :
AUDIT OF TRADE RECEIVABLES
APPENDIX 1 :
APPENDIX 2 :
APPENDIX 3 :
AUDIT OF OTHER EXPENSES
APPENDIX 1 :
APPENDIX 2 :
APPENDIX 3 :
OTHER AUDIT PROCEDURES
43
ASSESSMENT OF SUBSEQUENT EVENTS
OVERVIEW OF ACCOUNTING STANDARDS
WRITTEN REPRESENTATIONS
AUDIT QUALITY ASSURANCE, AUDIT COMPLETION AND EVALUATION OF RESULTS OF TESTS PERFORMED
COMMUNICATION WITH THOSE CHARGED WITH GOVERNANCE
APPENDIX 2 :
FORMING AN OPINION - AUDIT REPORT ON THE FINANCIAL STATEMENTS
49.1 894
49.2 895
49.3 901
APPENDIX 1 : 911
APPENDIX 2 : 918
APPENDIX 3 : 921
APPENDIX 4 : 929
OVERVIEW OF REGULATORY MECHANISM IN INDIA
50.1 983
50.2 984
50.3 992
CHAPTER C HAPTER
AUDIT OF REVENUE FROM OPERATIONS
33.1 INTRODUCTION
a Proportionate completion method
b Completed service contract method
For example, a contract requires the entity to install wooden benches at various parks maintained by the municipal corporation across the city. The contract stipulates that consideration shall be payable only upon installation of all benches across the city and the consideration is a lump sum amount for the entire contract. Completion of services will be acknowledged by the municipal corporation only when all benches have been installed. In this case revenue will be recognized upon completion of the contract, that is, when all benches have been installed across the city.
Revenue arising from the use by others of enterprise resources
Uncertainties in Revenue Recognition
33.2 AUDIT OF REVENUE
Para 33.2 686
i Existence:
For example, in respect of sale of goods, risks and rewards have been transferred.
ii Completeness:
For example, there are no instances where sale has been completed, such that the risks and rewards have been transferred but the same has not been recognized.
iii Accuracy:
iv Presentation & Disclosure:
33.2.1 Potential Risks of Material Misstatements in Revenue
When identifying and assessing the risks of material misstatement due to fraud, the auditor shall, based on a presumption that there are risks of fraud in revenue recognition, evaluate which types of revenue, revenue transactions or assertions give rise to such risks
For example, this may be achieved by ‘channel stuffing’ . For example, recognition of revenue on shipments that never occurred
For example, while admission fees/ registration fees from students may be recognised upfront, tuition fees should be recognised as revenue over the period of instruction .
For example, there are significant sales returns subsequent to the period-end
Note: The above is not a comprehensive list of all possible risks of material misstatement. This is only a list of most common risks. The auditor should evaluate the potential risks of material misstatement based on the facts and circumstances of the entity being audited.
33.2.2
Audit Procedures: Revenue
Accounting Standard 9 . [For example, policy to recognise dividend income on the basis of past trend or newspaper reports citing accrual basis of accounting is not in line with generally accepted accounting principles
An illustrative format for daily cash reconciliation is given below
E-Way Bill vis-à-vis
e-BRC and Bulk e-BRC details i.e., -
33.3 REPORTING REQUIREMENTS
Companies (Auditor’s Report) Order, 2020 Clause (3)(viii)
33.4 DISCLOSURE REQUIREMENTS AS PER SCHEDULE III (DIVISION 1) OF THE COMPANIES ACT, 2013 AND AS 9 “REVENUE RECOGNITION”
Schedule III
“On the introduction of Goods & Services Tax from 1 July 2017 onwards, the collection of GST by an entity would not be an inflow on the entity’s own account but it shall be made on behalf of the government authorities. Accordingly, the revenue should be presented net of GST collected.”
