DONT'S MESS WITH AUDITORS : DISCUSS ABOUT THE AUDIT PROCEDURES FOR REVENUE ACCOUNT

What Is a Revenue Audit?

A revenue audit is a two-part process that examines the figures and information on a company's tax returns against those found in its business records. In general, auditors check the returns of income over a one-year period. However, they may review your records for prior years too in case they notice any discrepancies.

This process has the role to monitor and ensure tax compliance. It also helps identify signs of tax evasion as well as additional liabilities. The auditors will also collect interest, tax or penalties where applicable.

As part of a financial audit, the auditor must assess the inherent risk associated with the revenue cycle and perform tests to determine it is relatively free of error or fraud. The inherent risk for this cycle is related to the cutoff dates for particular types of sales and the pressures from management to misstate revenues. By conducting so-called substantive tests and tests of controls, the auditor can provide some assurance that the revenues of the company are recorded accurately.

What is the revenue process?

Revenue recognition is an accounting concept that dictates how a company records sales transactions. Companies cannot recognize revenue until it is earned and realizable. Revenue is earned when making sales of goods or services. Realizable indicates the company expects to receive cash relating to previous sales. External audits review a company’s accounting procedures relating to revenue recognition. Audits ensure a company is properly recording information according to national accounting standards.