Revenue and expenses - part 1

In this lesson

1. 0:00 Revenue recognition and audit procedures
2. 1:02 Identifying performance obligations and transaction price
3. 2:05 Cash in advance and variable transaction elements
4. 3:50 Pension schemes and employee benefit audits
5. 6:10 Payroll expenses and substantive testing
6. 7:49 Capitalising borrowing costs on assets

About this lesson

We cover the five-step revenue recognition model under IFRS 15, focusing on identifying performance obligations, determining transaction prices, and verifying recognition timing through contracts, dispatch notes, and customer correspondence. You'll also explore audit procedures for employee benefits (defined benefit and contribution pension schemes), payroll expenses, and capitalised borrowing costs—understanding how to use third-party evidence, analytical procedures, and documentation to test these high-risk areas. The lesson walks you through practical audit techniques for each area. For revenue, you'll learn how to sample orders and invoices, review contracts to understand when performance obligations are satisfied, and identify red flags like cash received in advance or variable consideration. For payroll, you'll discover how to use substantive analytical procedures by comparing year-on-year figures and calculating expected totals based on headcount and pay rates. For pension schemes, you'll understand the difference between defined benefit and defined contribution arrangements and why actuarial valuations require expert reliance. For borrowing costs, you'll see how to verify capitalisation by tracing interest calculations back to loan documentation and confirming payments through bank statements. This content directly supports Paper AAA (Advanced Audit and Assurance) and builds your ability to identify audit risks, select appropriate procedures, and obtain sufficient, relevant evidence in real-world scenarios.

Duration: 9m