Audit Procedures

Obtain revenue GL listing for Dec 2024 and trace to total revenue

Select sample of 40 transactions (stratified by amount) from revenue log

Verify customer contract existence and terms for each sample item

Examine supporting shipping docs to verify revenue recognition timing

Inspect invoice to delivery date for evidence of proper recording

Reconcile sample transactions to AR subsidiary and bank deposits

Test revenue from major customer (TechCorp) for validity and terms

Review subsequent month collections to validate Dec revenue

Obtain AR aging analysis as of 12/31/2024

Reconcile AR aging to GL balance

Send confirmations to 25 customers (including TechCorp)

For non-responses, examine subsequent collections and shipping docs

Evaluate collectibility of TechCorp $1.2M (92 days outstanding)

Review customer relationships for signs of credit deterioration

Evaluate adequacy of allowance for doubtful accounts

Test collectibility of >90 day items post-year

Observe physical inventory count at fiscal year-end

Perform test counts on sample SKUs and compare to inventory listing

Reconcile inventory listing to GL

Test cost allocation for finished goods from raw materials & labor

Evaluate NRV for all SKUs with >YoY increases using recent sales data

Identify slow-moving items (no sales >90 days) and evaluate reserve

Obtain current supplier quotes for raw materials to assess obsolescence

Review post-year sales to assess adequacy of year-end valuation

Obtain purchases GL listing and vendor invoice register for Dec 2024

Reconcile register to GL and monthly statements

Test authorization controls - sample 25 purchases for purchase order, receipt, invoice match

For purchases >$50K, verify dual approval was obtained (note deficiency if not)

Test cutoff: compare invoice date to receipt date for Dec/Jan transactions

Sample 15 pre-recorded liabilities and verify supporting documents

Vouch sample transactions to supporting PO, receipt, and invoice

Request 10 vendor confirmations for outstanding balance verification

Obtain payroll register for Dec 2024 and reconcile to GL

Sample 10 employees and verify pay rates authorized in personnel file

Recalculate 5 sample payroll transactions for accuracy

Verify payroll tax deposits made on time per regulatory requirements

Review payroll accruals for year-end (vacation, bonus) reasonableness

Obtain copy of credit facility agreement

Request lender confirmation of outstanding balance

Recalculate covenant ratios (leverage, interest coverage) as of 12/31

Evaluate management's going concern assessment

Review loan agreement for covenant violations or amendments post-year