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Understanding The Flow - Receipts

The document provides details on understanding the cash receipts process at a client, including the principal steps, related accounts, potential issues, and control procedures. It documents a walkthrough performed to validate the understanding, including inquiring about exceptions and errors. The conclusion confirms the walkthrough validated the understanding of the cash receipts flow of transactions.

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Philip Castro
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© © All Rights Reserved
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82 views

Understanding The Flow - Receipts

The document provides details on understanding the cash receipts process at a client, including the principal steps, related accounts, potential issues, and control procedures. It documents a walkthrough performed to validate the understanding, including inquiring about exceptions and errors. The conclusion confirms the walkthrough validated the understanding of the cash receipts flow of transactions.

Uploaded by

Philip Castro
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Ref.

: A2

Understand the Flows of Significant Classes of


Transactions, including Walkthrough – Cash
Disbursements

Client: Prepared By:


Period End: Reviewed By:

Professional standards require us to obtain an understanding of the flows of transactions sufficient to identify and
understand a) major classes of transactions in the entity’s operations; b) how such transactions are initiated; c)
significant accounting records, supporting documents and accounts in the financial statements; and d) the
accounting and financial reporting process, from the initiation of significant transactions and other events to their
inclusion in the financial statements.

Related Accounts

Cash receipts typically have a significant effect on the following accounts (modify account names as appropriate and
list other accounts not pre-populated below):

 Cash  Sales discounts


 Accounts receivable  Sales Returns

Principal Steps in the Cash Receipts Flow of Transactions


Document below the job title(s) of the individual(s) responsible for each of the steps in the cash receipts flow of
transactions. To help ensure that we properly consider the effects of computer processing in making our risk
assessments and developing our audit plan, indicate those steps where computer processing is involved by placing
an “X” in the column for the appropriate step.

Process Step Performed By – IT/Reliance on


(Job Title Only) electronic data?
Approval of credit sales for customers such as City of Cebu, Mandaue Sales Manager
√
and regular customers.
Move out the inventory to be shipped and will update the perpetual Inventory Clerk
√
inventory records.
Comparison of bill of lading, sales order and will prepare the invoice to Accounting Office
√
be sent to the customers.
Receive the check then send it to the president for necessary Accounting Staff
endorsement.
√
Update the general and subsidiary ledger of Accounts Receivable.
Prepare the deposit slips of the collections for the day. Cashier √
Approves any write-down of receivables President √

Provide any other details that are necessary to understand the initiation, processing, recording and reporting of
cash receipts:

What Could Go Wrongs (WCGW) Accounts and Assertions Affected by WCGW


Balance Sheet Income Statement
Ref.: A2

Understand the Flows of Significant Classes of


Transactions, including Walkthrough – Cash
Disbursements

Client: Prepared By:


Period End: Reviewed By:

Overcollection of Cash  Cash


 Accounts Receivable
Undercollection of Cash  Cash
 Accounts Receivable

Consideration of Control Procedures


Professional standards require us to obtain an understanding of a client’s control procedures sufficient to develop
the audit plan. Document below the control procedures that the client has put in place to prevent or detect errors in
processing and recording transactions for this accounting process. It is not necessary to perform walkthroughs of
these controls unless we intend to assess control risk below the maximum. The absence of control procedures may
require additional audit procedures relating to one or more financial statement assertions for the account(s)
affected.

Yes No
Are cash receipts deposited in the bank at least daily? √
Is someone responsible for ensuring a proper cut off (i.e., all cash receipts are recorded in the
√
period received)?
Are bank reconciliations performed and reviewed by supervisory personnel, with reconciling
√
items followed-up on and resolved in a timely manner?
Is the accounts receivable listing reconciled to the general ledger and reviewed by supervisory
√
personnel, with reconciling items followed-up on and resolved in a timely manner?

Walkthrough
Describe the walkthrough tests performed on the flow of transactions. In so doing determine that the walkthrough
encompasses the entire flow of initiating, authorizing, recording, processing and reporting individual transactions
and, to the extent necessary, related controls. Use original source documentation and information technology that
the client personnel typically would use in the flow of transactions:

Performance Considerations Yes/No/ Initials &


N/A Date
a. Inquire of personnel about their understanding of what is required by the prescribed √
procedures and, to the extent necessary, controls to determine whether the processing
procedures are performed as originally understood and on a timely basis.

Inquired of: ______________________Date: _______________________


Key findings _______________________

b. Note any exceptions to the prescribed procedures and, to the extent necessary, controls √
identified and the impact this has on the audit.
Ref.: A2

Understand the Flows of Significant Classes of


Transactions, including Walkthrough – Cash
Disbursements

Client: Prepared By:


Period End: Reviewed By:

c. In instances where we have identified a significant risk and are required to assess control √
risk, did the walkthrough procedures include an appropriate evaluation of the controls
sufficient to determine the effectiveness of the design of the controls and whether controls
have been implemented?
d. Did our inquiries of company personnel include follow-up questions about what company √
personnel do when they encounter errors, the types of errors they have encountered, what
happened as a result of finding errors, and how the errors were corrected?
e. In instances where we identified significant changes in the flow of transactions did we √
evaluate the nature of the change to determine whether to walkthrough transactions
processed both before and after the change?
Conclusion (Check box to confirm conclusion)
Our walkthrough procedures have confirmed our understanding of the cash receipts flow of transactions as
√
evidenced by our system documentation.

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