1.
Sales Transactions
A. Substantive Tests of Transactions
Assertions
A. Existence / B. Occurrence
Recorded sales are for
shipments actually made to
customers
C. Completeness
All sales transactions that
occurred are recorded.
D. Rights and obligations
Sales recorded represent
only sales transactions.
Potential Misstatements
Sales for which shipment of
goods was not made and
therefore did not occur may
be recorded.
Goods may be shipped but
not billed and therefore not
recorded.
Goods shipped on
consignment may be
recorded as sales.
Substantive Audit
Procedures
For a sample of entries in
the sales journal, compare
sales invoice copy,
customer order, and sales
invoice.
For a sample of shipping
documents, trace sales
invoice and entry into sales
journal and accounts
receivable subsidiary ledger
Perform cutoff tests.
From a sample of sales
Invoices, examine the
customer order and
shipping document to
determine whether the
transaction should have
been recorded as a
consignment transaction
rather than as a sale.
E. Valuation /

F. Measurement

Sales are correctly billed Sales and accounts For sample of entries in the
and recorded. receivable may be sales journal, (a) examine
misvalued sales invoice shipping
document, and customer
order for consistency of
descriptions and quantities;
(b) examine sales orders for
credit approval; and (c)
check prices and extensions
Foot sales journal and
general ledger account.

G. Presentation and
disclosure

Sales and accounts Revenues may not be For a sample of entries in

receivable are recorded to properly classified. the sales journal, verify the
result in presentation and accuracy of account coding.
disclosure in accordance
with PFRS.
 B.
C. Substantive Tests of Details of
Balances
Assertions
A. Existence/ B. Occurrence
Sales and accounts receivable are for
shipments made to customers.
C. Completeness
Sales transactions that occurred and existing
accounts receivable are recorded.
D. Rights and obligations
Accounts receivable are owned by the client.
E. Valuation /F. Measurement
Accounts receivable are properly valued
1. Confirm accounts receivable and
perform alternative procedures
for confirmations not returned.
2. Perform analytical procedures to
test sales and accounts receivable.
3. Perform a test of sales
cutoff.
4. Review minutes of the board of
directors' meetings, inquire of
client personnel read contracts
and agreements, and confirm with
lenders any indications that
accounts have been assigned,
sold, or pledged.
5. Verify the mathematical accuracy
of the accounts receivable aging
schedule and trace it to the
accounts receivable subsidiary
ledger.
6. Test the adequacy of the
allowance for uncollectible
accounts.
G. Presentation and disclosure

Sales and accounts receivable are properly
presented and disclosed in accordance with
PFRS
7. Review the financial statements
and perform analytical procedures
to determine whether accounts
are classified and disclosed in
accordance with PFRS

C. Analytical Procedures

Misstatements

Analytical Procedures

Overstatement or

understatement of sales

1. Compare the sales amount and gross

2. Compare the gross profit with industry

3. Compare sales returns and allowances

profit percentage for product lines by

month and with those of previous years

data

Overstatement or

understatement of sales retums

and allowances

as a percentage of gross sales with

previous years' percentages.

Overstatement or

understatement of allowance for

uncollectible accounts

4. Compare the accounts receivable

turnover with the rate for previous

years and with industry data

Substantive Tests of Transachons ane

Compare uncollectible accounts expense

as a percentage of sales with the rate for

previous years and with industry data

Compare the allowance accounts as a

percentage of accounts receivable with

the percentage for previous years and

with industry data

Compute the percentage of accounts

receivable by age category and compare

with previous years' data

Compare written-off accounts that were

outstanding at the end of the previous

year with the allowance for uncollectible

accounts to evaluate the adequacy of the

previous allowance.

5.

6.

7.

8.

Errors in individual customers

accounts receivable

Compare individual customer balances

with balances of the previous year

'

9.

II. Cash Receipts Transactions

A.

Substantive Tests of Transactions

Potential

Misstatements

Substantive Audit

Procedures

Assertions

A. Existence/

B. Occurrence

Recorded receipts Fictitious cash receipts

represent actual may be recorded.

collections of cash
from customers

For a sample of entries in

cash receipts journal,

trace to the prelisting of

cash receipts and to

remittance advice. For a

sample of entries

reconcile daily deposit to

validated deposit ticket

C. Completeness /

D. Rights and

obligations

All receipts of cash

and checks are

recorded

Cash may be

misappropriated.

For a sample of days

verify that all cash

receipts are recorded by

reconciling daily listing(s)

of cash receipts and

validated deposit ticket to

cash receipts journal