Question
You are conducting an audit on your client's revenue cycle for the 2021 financial year. Your client is a medical device distributor company. The following
You are conducting an audit on your client's revenue cycle for the 2021 financial year. Your client is a medical device distributor company. The following is what you may encounter during the audit:
a. There are sales in large numbers from clients to customers. The sale was shipped on 27 December 2021 and only arrived at the customer's warehouse on 3 January 2022. The client records the sale as a sale in 2021.
Question: What audit evidence do you need to ensure cut off transactions are posted in the correct period?
b. The number of customer clients based on the customer database and accounts receivable subsidiary ledger is not much, approximately 100 customers, consisting of hospitals, clinics and pharmacies.
Question: If you want to confirm an account receivable, will you use positive or negative confirmation? Explain the reason
c. One of the policies of the client is that they sell to customers on credit by providing a payment period of 30 days. If the customer pays on time, a 3% discount is given. Clients receive payments from customers in the form of cash payments to cashiers or collectors, transfers to the client's company bank account, and payments via checks, and post-dated checks. Based on this policy you perform a risk assessment.
Question: Explain the risk of fraud or misstatement that can arise!
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