Revenue from Operations Audit Working Paper
(Following draft may be used as an example)
Purpose:
The purpose of this workpaper is to verify the measurement and recognition of revenue, its incidence of recognition and relevant estimates and assumptions required to compute the revenue recognised during the year.
Procedures Planned:
- Obtained the ledger dump for revenue from sale of goods and sale of services recorded by the company during the period.
- Obtained the revenue contracts for determining the incidence of revenue, performance obligations and transaction price for measurement of revenue.
Analytical Review:
- Prepare TOC (Test of controls) and TOD (Test of Details)
- Verify the totals of each category of goods and services.
- Verify the value of revenue recognised during the year and compare with previous years.
- Analyse the revenue using ratios as the parameter of measure.
- Ascertain changes in the business model as discontinuance of product line or operations in a unit.
Test of Details:
Overall Testing – Revenue from operations
- Verify and testing the sample invoices with all supporting documents.
- Verify the significant increase or decrease in revenue at or near the balance sheet date.
- Verify sales returns by customers have been adjusted in revenue ledger and inventory.
- Outward movements in quantity are matched as per sales dump and inventory register.
- Verify sales of goods and services are reconciled with taxes returns.
- In case of Ind AS, revenue recognition criteria is fulfilled as per Ind AS 115 like Identification of Contract, Determining of performance obligation, Measurement of Transaction Price, Allocation of Transaction price to various performance obligations, Recognition of revenue over the period of time or at a point in time.
- Verify sample invoices that condition for identifying a contract with customers has been satisfied.
- Verify that performance obligation is at a point in time/ or over time and revenue is recognised accordingly.
- Verify the process of determination of transaction price and allocation of transaction price to performance obligation.
- Verify unbilled revenue or deferred revenue recognition applying subsequent testing procedure.
- Verify the transactions relating on exchange or barter basis.
- Verify sequence of invoice series issued or cancelled during the period.
- Ensure that recorded revenue transactions are pertaining to the relevant year of audit.
- Verify that revenue cut off procedures have been applied accurately.
Records/ Documents to be verified:
- Revenue budgets.
- Revenue recognition policies.
- Invoices, Debit notes, Credit notes, delivery challans, E way bills.
- Contract with customers etc.
Observations and Conclusion:
On the basis of audit procedure, we found out that nothing adverse was observed for auditors to write any significant observation.
