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Receivable Cycle Concept Maps Guide

The document discusses the receivable cycle and revenue recognition standards. It covers initial recognition, subsequent measurement, impairment, and derecognition of accounts receivable. It also discusses revenue recognition standards and how to recognize revenue to depict the transfer of promised goods or services. Finally, it identifies audit risks related to accounts receivable and revenue and appropriate audit procedures to address each risk.

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kat kale
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308 views2 pages

Receivable Cycle Concept Maps Guide

The document discusses the receivable cycle and revenue recognition standards. It covers initial recognition, subsequent measurement, impairment, and derecognition of accounts receivable. It also discusses revenue recognition standards and how to recognize revenue to depict the transfer of promised goods or services. Finally, it identifies audit risks related to accounts receivable and revenue and appropriate audit procedures to address each risk.

Uploaded by

kat kale
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
  • Concept Maps of Receivable Cycle
  • Comparative Analysis and Recalculation

Concept Maps of Receivable Cycle

Account Receivable Sales / Revenue

Standard(s) PAS 32,39, PFRS 7,9,15 PAS 18, PFRS 15

Initial Recognition Current (Short-term) - Face value


Non-Current (Long-term)
- Face value if with same or
reasonable rate
- Present value if with
unreasonable or no interest rate

Subsequent Measurement Net realizable value (receivable Recognize revenue to depict


less allowance) the transfer of promised goods
Short-term: Gross AR - allowance or services to customers in an
Long-term: Present value or amount that reflects the
carrying value consideration to which the
entity expects to be entitled in
exchange for those goods or
services.

Impairment Provisions for Bad Debts (doubtful


accounts or uncollectible accounts)

Derecognition Collection, Write-off, Factored,


Discounted

FS Assertions - Balance Existence, Rights and Obligations, Rights and Obligations and
completeness and Valuation Completeness

FS Assertions - Transactions Occurrence, Completeness, Occurrence, Completeness.


Accuracy, Cut-off and Accuracy, Cut-off and
Classification Classification

Audit Risks Threats 1. The company intentionally 1. The company intentionally


overstates accounts receivable overstates revenue 
2. Company employees steal 2. Without proper cutoff, an
collections  overstatement of revenue
3. Without proper cutoff, an occurs 
overstatement of accounts 3. Revenue recognition
receivables occurs 
4. Allowances are understated

Appropriate Audit Procedures 1. Confirm accounts 1. Create comparative


receivable balances (especially summaries of all significant
larger amounts) revenue accounts,
2. Vouch subsequent period comparing the current year
collections, making sure the amounts with historical
subsequent collections relate to data (three or more years if
the period-end balances possible)
(sampling can be used) 2. Create summaries of
3. Thoroughly review average per customer
allowance computations to see income and compare with
if they are consistent with prior prior years (you may want
years; compare allowance to do this by specific
percentages to industry revenue categories)
averages; agree to supporting 3. Compute average profit
documentation (e.g., histories of margins by sales categories
uncollectible amounts); and compare with previous
recompute the related numbers years

Concept Maps of Receivable Cycle Account Receivable Sales / Revenue Standard(s) PAS 32,39, PFRS 7,9,15 PAS 18, PFRS 15 Initia
if they are consistent with prior years; compare allowance percentages to industry averages; agree to supporting document

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