Revenue process internal controls for manufacturers: An evaluation tool for independent auditors and managers
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Authors
Lou Orchard
Matthew L Hoag
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Journal Article, Academic Journal
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Abstract
This paper presents a tool for evaluating internal control objectives and activities pertinent to the revenue process for companies operating in the manufacturing sector. This evaluation tool may be used by independent auditors as a general benchmark in performing a preliminary evaluation of a manufacturing client’s internal control over the revenue process. Independent auditors who will find the tool most useful will primarily be those wishing to comply with U.S. Generally Accepted Auditing Standards (“GAAS”), including those performing integrated audit engagements in accordance with Public Company Accounting Oversight Board (“PCAOB”) Auditing Standard No. 5 and the new requirements set forth in COSO’s Internal Control – An Integrated Framework. In instances where important internal control activities have been omitted from the client’s system, the auditor should consider whether the omission increases the risk of material misstatement. This tool may also be used by managers to evaluate the adequacy of their company’s internal control activities within the revenue process.