Ref.

Understand the Flows of Significant Classes of

Transactions, including Walkthrough Cash Receipts
Client:
Period End:

Prepared By:
Reviewed By:

Professional standards require us to obtain an understanding of the flows of transactions sufficient to identify and
understand a) major classes of transactions in the entitys operations; b) how such transactions are initiated; c)
significant accounting records, supporting documents and accounts in the financial statements; and d) the accounting
and financial reporting process, from the initiation of significant transactions and other events to their inclusion in the
financial statements.

Related Accounts
Cash receipts typically have a significant effect on the following accounts (modify account names as appropriate and list
other accounts not pre-populated below):

Cash
Accounts receivable

Sales discounts

Principal Steps in the Cash Receipts Flow of Transactions

Document below the job title(s) of the individual(s) responsible for each of the steps in the cash receipts flow of
transactions. To help ensure that we properly consider the effects of computer processing in making our risk assessments
and developing our audit plan, indicate those steps where computer processing is involved by placing an X in the
column for the appropriate step.
Process Step

Performed By
(Job Title Only)

IT/Reliance on
electronic data?

Provide any other details that are necessary to understand the initiation, processing, recording and reporting of cash
receipts:

What Could Go Wrongs (WCGW)

Consideration of Control Procedures

Accounts and Assertions Affected by WCGW

Balance Sheet
Income Statement

Ref.:

Understand the Flows of Significant Classes of Transactions,

including Walkthrough Cash Receipts
Professional standards require us to obtain an understanding of a clients control procedures sufficient to develop the
audit plan. Document below the control procedures that the client has put in place to prevent or detect errors in
processing and recording transactions for this accounting process. It is not necessary to perform walkthroughs of these
controls unless we intend to assess control risk below the maximum. The absence of control procedures may require
additional audit procedures relating to one or more financial statement assertions for the account(s) affected.
Yes

No

Are cash receipts deposited in the bank at least daily?

Is someone responsible for ensuring a proper cut off (i.e., all cash receipts are recorded in the
period received)?
Are bank reconciliations performed and reviewed by supervisory personnel, with reconciling
items followed-up on and resolved in a timely manner?
Is the accounts receivable listing reconciled to the general ledger and reviewed by supervisory
personnel, with reconciling items followed-up on and resolved in a timely manner?

Walkthrough
Describe the walkthrough tests performed on the flow of transactions. In so doing determine that the walkthrough
encompasses the entire flow of initiating, authorizing, recording, processing and reporting individual transactions and,
to the extent necessary, related controls. Use original source documentation and information technology that the client
personnel typically would use in the flow of transactions:

Performance Considerations

Yes/No/
N/A

Initials &
Date

a. Inquire of personnel about their understanding of what is required by the prescribed

procedures and, to the extent necessary, controls to determine whether the processing
procedures are performed as originally understood and on a timely basis.
Inquired of: ______________________Date: _______________________
Key findings

_______________________

b. Note any exceptions to the prescribed procedures and, to the extent necessary, controls
identified and the impact this has on the audit.

c. In instances where we have identified a significant risk and are required to assess control
risk, did the walkthrough procedures include an appropriate evaluation of the controls
sufficient to determine the effectiveness of the design of the controls and whether controls
have been implemented?
d. Did our inquiries of company personnel include follow-up questions about what company
personnel do when they encounter errors, the types of errors they have encountered, what
happened as a result of finding errors, and how the errors were corrected?
e. In instances where we identified significant changes in the flow of transactions did we
evaluate the nature of the change to determine whether to walkthrough transactions
processed both before and after the change?
Conclusion (Check box to confirm conclusion)
Our walkthrough procedures have confirmed our understanding of the cash receipts flow of transactions as
evidenced by our system documentation.