Premium Essay

Audit Case

In: Business and Management

Submitted By Summerlee
Words 5672
Pages 23
Vol. 18, No. 3
August 2003 pp. 275-290

Designing Audit Procedures
When Evidence Is Electronic:
The Case of e-Ticket Travel Revenue

A. Faye Borthick and Jack E. Kiger ABSTRACT: The objective of the Fly Airline case is for you to learn to develop audit procedures in a context, e-ticket revenue, in which most of the evidence is available electronically, and in which many tests of controls and substantive tests can be performed using data stored in electronic form. In sequence, you will identify controls and their objectives, match controls to financial statement assertions for revenue, develop tests of controls, develop substantive tests for each assertion, and organize audit procedures into an effective and efficient audit program.

Keywords: auditing; e-ticket revenue; collaborative learning; electronic evidence; internal control; monitoring; systems expertise for auditing.

OVERVIEW ly Airline's revenue generation begins when a customer selects a flight for a specific date and time. The process is similar whether a ticket agent or the customer interacts with the system to make the reservation. If the customer is paying with a credit card, the system validates the credit card number the customer presents for billing before making the reservation.
When it obtains approval of the credit charge (electronically, from the card issuer), the system records the charge and other details of the reservation. The customer gets a confirmation number and itinerary immediately, and gets a boarding pass at the gate only by presenting picture identification.
Daily, the system batches each day's charges by credit card issuer and transmits them electronically to credit card issuers. Until a flight occurs, ticket sales are recorded as unearned revenue. After a flight, the system records earned revenue based on…...

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