- Occurrence: Revenue transactions recorded actually occurred.
- Completeness: Every aspect is recorded.
- Accuracy: All operations have been recorded accurately.
- Cutoff: Revenue transactions have been recorded in the correct accounting period.
- Classification: Revenue transactions are properly classified.
- Presentation: Financials is presented and disclosed in accordance with applicable accounting standards.
- Rights and Obligations: The entity has the right to the recorded income, and the related obligations are properly disclosed.
Internal Control
Examine the revenue-related internal controls and learn what you can from them.
Analyze the processes that lead up to income being recorded.
Perform walkthroughs and substantial testing to ensure that critical controls are functioning as intended.
Tests of Controls
Look at the records of the internal controls.
Analyze how well critical controls, including division of responsibilities, authorization, and review, are functioning.
Note down in detail any failings or gaps in control that were uncovered in the testing process.
Substantive Tests of Transactions
Pick a subset of revenue transactions and investigate their origins.
Verify financial transactions with clients.
Make that revenue is being recorded correctly and in full.
Assess the results on the financial statements from the revenue recognition policies.
Examine the ups and downs of sales and compare them to prior time periods.
Audit Report
Report Title
Independent Auditor’s Report
Audit Report Address
Jim’s Auto Body (Inc./LLC)
1177 Sesame Street
New York, NY 10002
Introduction
For Jim’s Auto Body (Inc./LLC), we have audited the accompanying financial statements, which consist of a balance sheet as of [reporting date], an overview of operations, an assertion of stockholders’ equity, and a clause of cash flows for the year ended, and notes to the fiscal declarations. Management is liable for the creation, execution, and upkeep of internal control relevant to the compilation and accurate display of these records in accordance with IRS instructions.
Our major purpose in doing our audit of Jim’s Auto Body (Inc./LLC) was to provide an opinion on the fairness of the financial statements. We conducted this audit to ensure that the company’s reported revenue is as accurate and reliable as possible. We performed substantive tests of transactions and evaluated the efficiency of internal controls related to revenue recognition as part of our audit to gather adequate and suitable audit evidence. Our objective in carrying out these checks was to determine whether Jim’s Auto Body (Inc./LLC) has accurately and completely reflected its revenues in its books and in conformity with all applicable laws and regulations.
Scope
Generally Accepted Auditing Practices (GAAP) in [country] formed the basis for our audit’s scope. According to those guidelines, we have to organize and carry out the audit in such a way that we can say with some degree of confidence that the financial statements are free from significant misrepresentation. An audit is a series of actions taken to gather proof of the accuracy of the financial statements’ quantities and disclosures.
The auditor’s professional judgment is relied upon to choose which techniques to use, taking into account the auditor’s evaluation of the likelihood of finding evidence of fraud or mistake in the financial statements. Internal control pertinent to the entity’s creation and fair appearance of the accounting records is considered by the auditor in making risk assessments to design auditing processes that are suitable in the context but not for the purpose of conveying an opinion on the efficiency of the entity’s internal control. In addition to assessing the accuracy of the financial data itself, an audit also evaluates the propriety of the accounting practices used and the validity of important accounting estimations made by management.
Opinion
Based on our audit and the information we have obtained, we have formed the opinion that the financial statements referred to above presently fair, in all material respects, the fiscal health of Jim’s Auto Body (Inc./LLC) as of [reporting date], and the outcomes of its business activities and its cash flows for the year then ended, in accordance with IRS instructions (Santos et al., 2021). Our audit followed procedures that are considered conventional in [country]. The guidelines stipulate that we must design and execute the audit in a way that provides reasonable certainty that no major misstatements have been made in the financial statements. To complete our audit, we used established methods designed to provide audit evidence on the financial statements’ numbers and disclosures.
We evaluated the potential for fraud or mistake to cause a substantial misrepresentation in the financial statements during our audit. We learned about the entity’s internal control over financial statement preparation and fair presentation so that we could plan effective audit processes. Our audit, however, was not intended to provide a judgment on the entity’s internal control efficiency.
We assessed the soundness of management’s accounting practices and the validity of its key accounting estimations in generating financial statements. To further guarantee the financial statements are in accordance with the relevant financial reporting system, we analyzed their overall presentation and any related disclosures. It is the management’s duty to ensure the accuracy of the financial reports. Based on our audit, we are obligated to provide an opinion on these financial statements. We were skeptical auditors who used their best judgment throughout the whole procedure.
Reference
Santos, T., Singh, S., & Young, G. J. (2021). Medicaid expansion and not-for-profit hospitals’ financial status: National and state-level estimates using IRS and CMS data, 2011-2016. Medical Care Research and Review, 79(3), 448–457. Web.