Profit and loss account: income

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Profit and loss account: income by Mind Map: Profit and loss account: income

1. Quick overview

2. Scope and definitions

2.1. Definitions

2.2. Scope

3. Overview and definitions

3.1. Turnover

3.2. Construction contracts

3.3. Percentage completion method

3.4. Principal vs agent

3.5. Government grants

4. Audit objectives

4.1. Risk of fraud in revenue recognition

5. Current issues and further resources

5.1. Further resources

6. Audit procedures

6.1. To ensure that income is not understated and is correctly classified and presented

6.2. To ensure that all items are processed in the correct period

6.3. To ensure that accurate disclosure is given of income by class and/or geographical market

6.4. To ensure that amounts accumulated in construction contracts are correctly calculated

6.5. To ensure that any contracts included exist

6.6. To ensure that turnover on contracts represents amounts chargeable to date

6.7. To ensure that all contracts are included

6.8. To ensure that all potential loss making (onerous) contracts have been correctly accounted for

7. Common problems

7.1. Failure to understand the client’s system

7.2. Failure to select the sample from the correct population

7.3. Insufficient audit evidence

7.4. Failure to determine existence of construction contracts

7.5. Failure to consider the ultimate profitability of a construction contract

7.6. Failure to consider the ultimate recoverability of any retention on the project

7.7. The client’s poor costing records

7.8. Failure to combine the work on this area with the work on the profit and loss account, debtors and creditors

7.9. Front-loading of contracts

8. Substantive analytical procedures

8.1. Computing an expected turnover

8.2. Sales

8.3. Product lines

8.4. Cash sales

8.5. Bank interest

8.6. Budgets and client expectations

8.7. Credit notes

8.8. Cut-off

9. Controls