Audit

This question is related to financial management (the ratio section). This question is asking about the cash receivable from the sales. You can use the following formula: Sales (Credit)/ Receivables. Usually the accaptable ratio is 1:0.5. If the receipt cycle is <0.5 means the receivable is quite fast such like C.O.D. for each sales transaction. However, if the receipt cycle is >0.5 even >1 means the receivable is very slow and probably there must some bad debts of the clients. In addition, if the receipt cycle is slow, this can effect the cash flow of the company.

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Analytical procedures may be helpful in identifying the existence of unusual transactions or events, and amounts, ratios, and trends that might indicate matters that have financial statement and audit implications. In performing analytical procedures as risk assessment procedures, the auditor develops expectations about plausible relationships that are reasonably expected to exist. When comparison of those expectations with recorded amounts or ratios developed from recorded amounts yields unusual or unexpected relationships, the auditor considers those results in identifying risks of material misstatement. However, when such analytical procedures use data aggregated at a high level (which is often the situation), the results of those analytical procedures only provide a broad initial indication about whether a material misstatement may exist. Accordingly, the auditor considers the results of such analytical procedures along with other information gathered in identifying the risks of material misstatement. See SAS 410 "Analytical procedures" for additional guidance on the use of analytical procedures. Observation and inspection may support inquiries of management and others, and also provide information about the entity and its environment. Such audit procedures ordinarily include the following:
Observation of entity activities and operations.
Inspection of documents (such as business plans and strategies), records, and internal control manuals.Reading reports prepared by management (such as quarterly management reports and interim financial statements) and those charged with governance (such as minutes of board of directors' meetings).
Visits to the entity's premises and plant facilities.
Tracing transactions through the information system relevant to financial reporting (walk-throughs).The auditor intends to use information about the entity and its environment obtained in prior periods, the auditor should determine whether changes have occurred that may affect the relevance of such information in the current audit. (SAS 315.3) For continuing engagements, the auditor's previous experience with the entity contributes to the understanding of the entity. For example, audit procedures performed in previous audits ordinarily provide audit evidence about the entity's organizational structure, business and controls, as well as information about past misstatements and whether or not they were corrected on a timely basis, which assists the auditor in assessing risks of material misstatement in the current audit. However, such information may have been rendered irrelevant by changes in the entity or its environment. The auditor makes inquiries and performs other appropriate audit procedures, such as walk-throughs of systems, to determine whether changes have occurred that may affect the relevance of such information. When relevant to the audit, the auditor also considers other information such as that obtained from the auditor's client acceptance or continuance process or, where practicable, experience gained on other engagements performed for the entity, for example, engagements to review interim financial information.
Discussion Among the Engagement Team The members of the engagement team should discuss the susceptibility of the entity's financial statements to material misstatements. (SAS 315.4)
The objective of this discussion is for members of the engagement team to gain a better understanding of the potential for material misstatements of the financial statements resulting from fraud or error in the specific areas assigned to them, and to understand how the results of the audit procedures that they perform may affect other aspects of the audit including the decisions about the nature, timing, and extent of further audit procedures.