TUV Ltd. is engaged in the business of manufacturing and sale of electronic appliances. During the audit of the company for the year ended 31st…

Audit Procedure – Occurrence Assertion: To verify that recorded sales represent goods actually shipped or services actually performed during the period, the auditor should perform the following audit procedures to satisfy the Occurrence assertion and ensure that revenue is not overstated: 1. Ensure revenue is not overstated by performing the following audit procedures: Check whether a single sales invoice has been recorded twice or whether a cancelled sales invoice has also been recorded.Test check a few sales invoices with their relevant entries in the sales journal.Obtain confirmation from a few customers to ensure the genuineness of sales transactions.Verify whether any fictitious customers and fictitious sales have been recorded.Examine whether any shipments were made without the consent and agreement of the customer, especially at the year end, with the intention of inflating sales figures.Check whether any unearned revenue has been incorrectly recorded as earned.Evaluate whether any substantial uncertainty exists regarding the collectability of sales proceeds.Examine whether customer obligations are contingent upon other actions such as financing, resale, etc. 2. Review the sequence of sales invoices to identify any missing, duplicate, or irregular invoices. 3. Review journal entries for unusual or non-routine revenue transactions. 4. Calculate the ratio of sales returns to sales and compare it with the previous year and enquire into the reasons for any significant increase or decrease. 5. Verify sales returns with supporting documents such as sales invoices, challans, credit notes, and stock registers. Based on above audit procedures, the auditor would be able to conclude whether the sales recorded during the period are genuine, relate to actual shipments or services rendered, and are free from fictitious, duplicate, or premature recognition. These procedures directly address the risks highlighted in the given question regarding overstatement of revenue, particularly at the year end, and provide reasonable assurance on the Occurrence assertion of revenue.