An Exemplary Checklist for verification of items of Revenue to be followed by the Auditor

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As part of their duties, auditors are responsible for verifying the income of an entity to ensure that they are valid and accurately recorded. To do this, auditors use various procedures such as examining records and performing analytical procedures. However, the extent and timing of these procedures depend on the auditor’s professional judgment, which takes into account the effectiveness of internal controls. It’s important for the auditor to ensure that the entity recognizes income based on recognized accounting principles.

(a) Examination of Records: One of the primary techniques used by auditors to verify income is the examination of records and documents. Since most transactions are supported by documentary evidence, the auditor needs to examine a large number of documents during the audit process.

(b) Analytical Procedures: To verify income, auditors should also perform analytical procedures, which involve analysing significant ratios and trends. This includes investigating fluctuations and relationships that don’t match other relevant information or deviate from predicted amounts.

To ensure that no significant income is overlooked, auditors often use a checklist of items to verify. In this context, we have discussed a checklist for auditors to verify items of income.

I. Whether the auditor has examined whether the entity has adequate cut-off procedures in relation to sales and sale returns

II. Whether the auditor has verified the efficacy of the cut-off procedures related to sales and sale returns

III. Whether the auditor has examined selected entries in the sales return journal with reference to receiving reports, credit notes, and entries in the customers’ accounts

IV. Whether the auditor has examined that revenue attributable to the sale excludes the interest element

V. Whether the auditor has verified the appropriate exchange rate used for recording revenue from export sales in a foreign currency

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