Summary of "تدقيق 101 - (10) - فحص الإيرادات وأرصدة العملاء"

This video, part of the Audit 101 series (episode 10), focuses on auditing two key financial statement accounts commonly found in commercial companies: Revenue and Trade Receivables (Customer Accounts). It discusses the types of risks associated with these accounts and the audit procedures to detect material misstatements, following international auditing standards.

Main Financial Strategies, Market Analyses, and Business Trends

Risk-based auditing approach: Emphasizes identifying specific risks related to each account and designing audit procedures to address those risks.
Use of management confirmations: Understanding management assertions about account balances and transactions as a starting point for risk assessment.
Analytical procedures: Using predictive models and comparisons to estimate expected Revenue and customer balances to identify discrepancies.
Control reliance: Evaluating and possibly relying on company internal controls (e.g., three-way matching for Revenue recognition, Credit Department reviews for receivables) to reduce audit effort.
Documentation and evidence collection: Importance of test of details and confirmations to gather sufficient and appropriate audit evidence.

Methodology / Step-by-Step Guide for Auditing Revenue and Customer Accounts

Auditing the Revenue Account

Identify management assertions (confirmations) related to Revenue:
- Occurrence: Recorded Revenue transactions actually happened.
- Completeness: All Revenue transactions that occurred are recorded.
- Accuracy: Revenue amounts are calculated correctly.
- Cut-off: Revenue is recorded in the correct accounting period.
- Classification: Revenue is classified correctly according to accounting standards.
Assess risks associated with each assertion:
- Fictitious sales (Occurrence risk).
- Unrecorded sales (Completeness risk).
- Miscalculated invoices (Accuracy risk).
- Revenue recorded in wrong period (Cut-off risk).
- Misclassification of non-operating income as Revenue (Classification risk).
Perform test of details for each risk:
- Select sample Revenue entries from the ledger.
- Verify supporting documents: sales invoices, purchase orders, delivery notes.
- Trace warehouse disbursement orders to accounting records (for completeness).
- Recalculate invoice amounts and discounts.
- Test Revenue recorded near period-end and subsequent period to verify cut-off.
- Confirm classification by reviewing nature of transactions.
Analytical procedures:
- Predict Revenue based on prior year sales volume and prices.
- Compare predicted Revenue to recorded Revenue.
- Investigate significant deviations beyond acceptable thresholds.
Evaluate internal controls:
- Example: Three-way match control (purchase order, sales invoice, customer receipt).
- Assess control design and operating effectiveness.
- Use control results to adjust substantive testing as appropriate.

Auditing Trade Receivables (Customer Accounts)

Identify management assertions related to receivables:
- Existence: Recorded receivables exist at the reporting date.
- Completeness: All receivables owed to the company are recorded.
- Valuation: Receivables are recorded at their net realizable value, considering expected credit losses.
- Rights and obligations: The company has legal rights to the receivables.
- Classification and presentation: Receivables are properly classified in the financial statements.
Assess risks for each assertion:
- Recording non-existent receivables.
- Omitting receivables owed by customers.
- Incorrect calculation or omission of allowance for doubtful debts.
- Recording receivables to which the company has no right.
- Misclassification of receivables.
Perform test of details:
- Obtain customer confirmations directly from customers to verify balances.
- Review subsequent cash receipts to confirm outstanding balances at year-end.
- Inspect documentation supporting receivables balances.
- Review and evaluate the company’s expected credit loss calculations:
  - Check assumptions, inputs, and methodology.
  - Compare with historical data and economic conditions.
- Cross-check classification and rights through confirmations and supporting documents.
Evaluate internal controls:
- Presence of a Credit Department that reviews expected credit losses monthly.
- CFO or Financial Manager approval of credit loss studies.
- Sample testing of control procedures to assess reliability.

Additional Notes

The video stresses the importance of combining test of details with control testing and analytical procedures for a comprehensive audit approach.
It highlights the practical application of auditing standards in real-world scenarios.
The presenter recommends the Audit 101 book, which complements the video series by providing detailed explanations in simple English, suitable for beginners and professionals alike.

Presenter / Source

The video is presented by an auditing professional (name not specified) who also authored the Audit 101 book.
References to additional resources such as CPI Talks channel for deeper understanding of credit loss calculations.