Question
Refer to exhibit 9.6 Identify planning analytical procedures that can help auditors identify areas of potential material misstatements in the revenue cycle. Exhibit 9.6 Ratios
Refer to exhibit 9.6 Identify planning analytical procedures that can help auditors identify areas of potential material misstatements in the revenue cycle.
Exhibit 9.6
Ratios Auditors Use in Planning Analytical Procedures in the Revenue Cycle
Gross margin analysis
Turnover of receivables (ratio of credit sales to average net receivables) or the number of days sales in accounts receivable
Average receivables balance per customer
Receivables as a percentage of current assets and/or total assets
Aging of receivables
Allowance for uncollectible accounts as a percentage of accounts receivable
Bad debt expense as a percentage of net credit sales
Sales in the last month (or quarter) to total sales
Sales discounts to credit sales
Returns and allowances as a percentage of sales
Some basic trend analyses in planning analytical procedures include:
Monthly sales analysis compared with past years and budgets
Identification of spikes in sales at the end of quarters or the end of the year
Trends in discounts allowed to customers that exceed both past experience and the industry average
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