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Hello,
Im really confused so im trying to answer question regarding revenue subtstantive testing, so i sort of need a grip of how to answer such questions. Do i go as follows:-
1) use AEIOU
2) link them to allocation, completness, obligation, valaution, existence, and rights?on the basis of these to points i draft my answer?
Thank you.
AEIOU are methods of collecting evidence.
Completeness etc are the assertions you need to verify.For revenue you would need to look at the assertions reelvant to transactions and events, not acccount balances So for revenue you need some tests on occurrence, completeness, accuracy, cut-off and classification.
Then devise how you would verify completeness:
eg choose orders and trace through to sales amounts in the revenue account (inspect). You couls also carry out analytical procedures.
Accuracy might mean reperforming the calulation of amounts on invoices with regard to price lists ets.
Occurence would be tracing back from an entry in sales through the despatch note to the oiginal order (again essentially the use of inspection)
and so on.
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