Audit Objectives

1. To determine whether all (completeness) revenues and expenses (rights and obligations)
applicable to the audit period (occurrence) have been recognized and are matched properly
(allocation) in accordance with GAAP.
2. To determine whether all material unusual and infrequent items are segregated properly in the
income statement (presentation).
3. To determine whether revenues and expenses are classified properly and consistently
(presentation).
4. To determine whether disclosures concerning revenue and expense are adequate and in
accordance with GAAP.

Auditing Procedure

1. Analytical review of operations

The auditor generally places heavy emphasis on analytical review procedures in the
revenue and expense area. The review of operations consists of comparing the income
statement for the year being audited with the budget for the year and the actual
amounts for the prior year and determining the underlying reasons for significant
variations or the lack thereof.
Explanation for significant variations are obtained first from the client personnel then
verified by examination of supporting evidence.
Analytical review of operations will also include comparison of revenue and expense
account balances with budgeted amounts. Significant variations between the actual
amount budgeted amounts may indicate that operations were not conducted in
accordance with the companys predetermined plans. The auditor can obtain the
explanations of such variances from the clients management.
2. Account Analysis
The auditor often will analyze certain selected operating accounts to supplement the
information already obtained elsewhere. Analysis is usually required for accounts that 1.
Require special disclosure 2. Contain information needed in preparing tax returns and
reports to SEC and 3. General account titles that suggest the likelihood of
misclassifications and errors.
Accounts generally requiring analysis are:
o Salaries and wages
o Taxes, licenses and fees
o Rents
o Legal and professional fees
o Maintenance and repairs
o Contributions
o Advertising
o Travel and entertainment
o Miscellaneous and interest expense
AUDIT ON REVENUES
AND EXPENSES

Mara Joy Baltazar