Within the revenue /receipt cycle, several paper and computer image documents are typically used to create an accounting system and, correspondingly, an audit trail for credit sales and cash collections. Among these documents are:

• Sales orders,

• Shipping documents, and

• Sales invoices.

Required:

1. Explain how approved sales orders can be used to test credit sales for understatements.

2. Explain how shipping documents can be used to test whether all sales transactions that should be recorded are actually recorded.

3. Explain how an auditor can use sales invoices to test whether billed sales were actually shipped.