Efficient sales audit procedures for NPOs

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hello and welcome to the channel today we are going to look at how to audit Grant Revenue so for a client that received grants during the year uh what is the process to audit that Revenue so let's get into the video so here I have my working paper and in our working paper you can see we are going to be looking at Grant revenues testing so what is the purpose so if you're going to be auditing Grant Revenue what is the purpose of your testing so the purpose is to assess accuracy so these are the assertions we are concerned about we are concerned about accuracy or chorus that the revenue actually occur classification because it is Grant revenue is it properly classified and we are also concerned about the cut of assertion so these are the assertions we are going to be looking at in this working paper so what are the procedure you're going to perform to audit this grant Revenue so for me the first thing I'm going to do I'm going to obtain an understanding of the revenue okay because it is a grand Revenue so you want to understand the purpose what is the reason for the grants why did the client receive the grant revenue and you're going to calculate your sample if the revenue um is much during the year you can't test all the grant Revenue okay so you're going to select some samples and then um what are you going to do next we're going to trace our Revenue to any supporting documentation okay we are going to request um supporting document from the client to be able to trace uh Revenue to those documents and then we're also going to trace the revenue to receipt of payment to be sure that okay the client actually receive um this amount during the year okay so um in this case I already selected my samples and as you can see here I have two samples which I selected to test and I got this from the general ledger okay so here I have my information the dates um the transaction type the number the name okay so this is the name of the body that issues the Grant and then the description it says boost Grant and then the amount so I took this information from the client's general ledger now I'm going to test it okay so what am I going to do so you can see my procedures right here it says agreed to support so it's asking the D that I agree this information to a proper support and I said yes because I obtained the grant um agreement or the grant letter from the client and then I agree this information information to the support and there was no issue so that's why I put yes and it's asking did I trace this amount to the bank I said yes because I obtained the client's bank statement and I traced this amount to the bank and look you can see the date here this was the date this is to show you that I actually traced to the bank so this was the date the deposit came into the bank okay and now remember we're also concerned about um classification assertion so is it properly classified should it actually be included in Revenue I said yes and that is because you can see my documentation right here okay so remember in auditing documentation is very important so I said we obtained and reviewed the 2022 guidelines okay for the Boost program so I obtained the um the guideline from the clients in order to help me to understand uh to understand the purpose of the grant okay from the Ministry of Agriculture I noted that the entity meets the eligibility criteria remember for some of the grants before you can get grants you have to meet some eligibility criteria so you have to check did your clients meet that criteria for them to have gotten the grant okay if you went through the um through the agreement or through the guideline and you see that your client does not meet the criteria then they have to you know make an adjustments in their books so I said we reviewed the bank statement until June 27 2022 and noted the full amount was received okay was received per our review of the grant agreement there are no outstanding conditions to be met for the grants to be payable okay so there are no outstanding so the client has met all the conditions okay so the client met all the conditions so it is okay for them to classify it as Revenue so assuming we went through the guideline now we saw that the client did not meet you know some of the conditions then they should not be classifying it as Revenue rather they should put that in the first Revenue till they are able to comply with the um conditions okay the criteria let's look at the second sample I selected this was also this was from the Minister of Finance and it's for small business funding okay so the clients also received for ten thousand dollars okay so also the same thing I agree to the support I obtained um the relevance support and I had read in this information I also trace the amounts to the bank and I could see that um they actually received the amount and I put the date here and I also said the classification is appropriate okay it's okay for the client to classify this as Revenue okay look at my documentation here again I said we obtained and reviewed the 2022 Ministry of Finance requests for funding okay because there was a request for funding and I requested this from the client and I actually saw that the government will provide ten thousand dollars to you know scale up uh production for small businesses okay and then we also obtained a copy of the client service agreement in this case there was a client service agreement which I obtained and then I reviewed it okay and I said ing to the agreements that I reviewed there are no ongoing conditions to be met for the grants to be repayable okay so it is okay for the client to classify this as Revenue so as you can see we actually tested uh um accessions we looked at accuracy the amount in the um bank is that what is in the GL okay uh we looked at some colors what is the date per the agreement okay should that have been in red revenue or not we also looked at classification okay is it appropriately classified should it be classified as revenue or deferred revenue so whenever you come across um Grant Revenue these are some procedures you can um take to audit the revenue thank you for watching the video today I'm going to see you in my next video and bye