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chapter four
Audit of the sales and collection cycle

In this Chapter we will cover:
1-Financial statement Cycles meaning
2-Classes of transactions in sales and Collection Cycle
3-Auditing Sales and Collection Cycles
First: Business functions in sales and collection cycles and the related documents:
Second: Designing tests of controls and substantive tests of transactions for sales
Third: Design test of Details for accounting receivable Balances

FINANCIAL STATEMENTS CYCLE:

Audits are performed by dividing financial statements into smaller segments
or components. The division makes the audit more manageable and aids in the
assignments of tasks to different members of the audit team. A company way to
divide an audit is to keep closely related types of transactions and account balances
in the same segment. This is called the cycle approach.

Ex: Sales, Sales R & A, cash receipts, AFDA, are four classes of
transactions that causes accounts receivable to increase or decrease. Therefore,
they are all parts of sales and collection cycle

CLASSES OF TRANSACTIONS IN THE SALES AND COLLECTION CYCLE:

There are five classes of transactions in the sales and collection cycle:

1. Sales (cash and sales on account):

Cash/AR XX

Sales XX
XX
2. Cash receipts

Cash XX

AR

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‫جميع الحقوق محفوظة ـ الإعتداء على حق المؤلف بالنسخ أو الطباعة يعرض فاعله للمسائلة القانونية‬