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Substantive audit procedures for revenues

Revenue is the income generated from the sale of goods or services, or any other use of capital or assets, associated with the main operations of an organization before any costs or expenses are deducted. Revenue is shown usually as the top item in an income (profit and loss) statement from which all charges, costs, and expenses are subtracted to arrive at net income. Also, called sales, or (in the UK) turnover

The following are substantive procedures for auditing revenue


Select a sample of customer orders and agree these to the dispatch notes and sales invoices and sales/subsidiary ledger to ensure completeness of revenue


Select a sample of sales recorded in the sales journals and vouch back to sales invoices, shipping documents, and customer orders.


Select a sample of sales invoices and perform the following procedures to ensure these are accurate:

  • Compare prices, discounts and terms and conditions with authorized price list and authorized terms and conditions
  • Recalculate taxes on the invoice.

Cut-off on sales:

When attending the warehouse for inventory count at year-end, the auditor should select the last goods dispatched notes made on that day, He should select further goods dispatched notes for dispatches both soon before and soon after the year-end.
The sample of goods dispatched notes should be traced to the associated sales invoices to ensure that sales invoices have been posted as sales in the correct accounting period.

Presentation and disclosure.

Review accounting policies for revenue recognition and ensure they comply with IFRS and are properly disclosed.
Read notes to the accounts to ensure they are accurate, complete and easy to understand.

7 thoughts on “Substantive audit procedures for revenues”

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