Reconciliation of trial balances and general ledger control accounts
Review of subsequent payments
Review of unmatched vendor invoices and receiving reports
Review of controls over purchasing, receiving, and cash disbursements
Accrued taxes and other expenses
Tax bills, invoices, and other documents supporting charges for services
Analysis of general ledger account activity
Tax bills, invoices, and other documents supporting charges for services
Documents relating to items accrued
Terms of tax bills, and so on
Subsequent payments
Comparison of account balances between years
Subsequent payments
Recalculation of amortization
Internal Revenue Service agents’ reports
Industry experience
Review of controls over recording of cash disbursements
Recomputation of ending account balance
Discussion of estimated future costs with entity personnel
Debt
Confirmation with lenders
Bank confirmations
Notes and loan agreements
Current interest rate quotations
Confirmation of terms with lenders
Note and loan agreements
Representations from management
Lease agreements
Foreign currency exchange rates from newspapers, and so on
Terms of note and loan agreements
Lease agreements
Reference in minutes to commitments, obligations, acquisitions, and so on
Terms of lease
Authorization in minutes of board meetings
Correspondence from legal counsel
Current bank prime rate schedules
Revenue
Documents in support of selected revenue transactions, including customer orders, contracts, shipping documents, and sales invoices
Tests of year-end sales and shipping cutoff procedures
Not applicable
Discussions with engineers regarding percentage of completion of long-term projects
Terms of documents supporting revenue transactions, including long-term contracts
Review of controls over shipping and billing activities
Review of subsequent transactions
Recalculations of percentage of completion computations
Documents in support of selected expense transactions, including purchase orders, contracts, check requests, and so on
Review of controls over shipping and billing activities
History of sales returns and allowances
Review of controls over recording long-term contract activity
Industry experience and trends
Subsequent credit memos
NOTE: Revenue recognition continues to pose significant audit risk to auditors. Therefore, auditors should be aware that the AICPA’s Audit and Accounting Guide, Auditing Revenue in Certain Industries, available through an online subscription, summarizes key accounting guidance regarding identifying circumstances and transactions that may signal improper revenue recognition, and provides guidance on auditing revenue transactions in selected industries not covered by existing AICPA Audit and Accounting Guides. The SEC has issued Staff Accounting Bulletin 104, Revenue Recognition, which summarized certain of the SEC staff’s views in applying GAAP to revenue recognition in financial statements. These two publications may be useful to auditors in evaluating revenue recognition issues. In addition, the Wiley publication Revenue Recognition has detailed and clear implementation guidance for the new revenue recognition standard.
Expense
Documents in support of selected expense transactions, including purchase orders, contracts, check requests, and so on
Test of year-end purchasing cutoff procedures
Not applicable
Recomputation of depreciation and amortization
Terms of documents supporting selected expense transactions, including large and unusual purchases
Confirmation of large and unusual purchases with suppliers
Review of subsequent transactions
Recomputation of amortization of prepaid and accrued expense and deferred charges
Review of controls over accounts payable and cash disbursements
Comparison of account balances between years
Analytical relationship of balances to total revenue
Review of controls over accounts payable and cash disbursements
