My senior confuses me. Why do we audit expenses the same way as revenue?

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What do you mean "same way"?


My guess is testing for existence of expenses

Risk assessment should answer your question


Yikes.we need to go back to office/client so staff can be immersed. Scary to think there could be seniors that have never been to a client or office. Not in a bad way but hard and not fair to them not experiencing the day to day.

It’s not the same. Similar principals, but not the same. We test expenses in a few different ways:

1) Substantive detail: making sure that what is recorded agrees to the invoice, the period is correct, and classification is correct.
2) Cutoff testing: this is to address your completeness.

Revenue is yes, a substantive test (agreeing to invoices, shipping docs, etc) and AR cutoff, but there’s a distinction in what is your assertion risks.

We are more worried about the completeness of expenses whereas for revenue, we worry about the existence. Also, you’d want to ensure that expense classification is appropriate ( I suppose revenue classification as well, but may be less common if only one revenue stream).

Anyway, this could be further elaborated upon, but I hope this helps a bit.

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