Question

Parts Inc. sells electrical components to large department stores and also has a few cash sales to electricians.
Sales invoices are prepared for all sales. Cash sales are recorded to the cash receipts journal and cash is deposited to the bank each day. All sales to large stores are credit sales and are handled by sales clerks by telephone or fax.
The sales clerk takes the customer’s request, checks the authorized customer list for credit limits (if it is a credit sale), prepares the sales invoice, and sends one copy to the inventory control department, who sends the ordered goods to the shipping department. For cash sales, the inventory control clerk brings the items sold to the sales counter and the goods are given to the purchaser at the time of sale. For credit sales, the shipping clerk signs the inventory control copy of the sales invoice and then prepare a shipping invoice. A third copy of the sales invoice is forwarded to the accounting department so that a clerk can enter the sale into the sales journal. The shipping invoices are maintained in the shipping department in case a shipment needs to be checked. All goods are shipped
FOB shipping point.

Required:
a. Design two audit procedures, in addition to sample selection, that will provide evidence of the occurrence/existence of sales. Identify the procedure (trace, compare, vouch, and so on) and the documents you are using, and explain why these procedures will show whether recorded sales are valid.
b. Design two audit procedures that will provide evidence of the completeness of sales. Identify the procedure (trace, compare, vouch, and so on) and the documents you are using, and explain why these procedures will show whether recorded sales are complete.



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  • CreatedJanuary 09, 2015
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