Chapter 12, Problem 12-19 Auditing

The following are misstatements that can occur in the sales and collection cycle: 1. A customer number on a sales invoice was transposed and, as a result, charged to the wrong customer. By the time the error was found, the original customer was no longer in business.

2. A former computer operator, who is now a programmer, entered information for a fictitious sales return and ran it through the computer system at night. When the money came in, he took it and deposited it in his own account.

3. A nonexistent part number was included in the description of goods on a shipping document. Therefore, no charge was made for those goods.

4. A customer order was filled and shipped to a former customer that had already filed for bankruptcy.

5. The sales manager approved the price of goods ordered by a customer, but he wrote down the wrong price.

6. A computer operator picked up a computer-based data file for sales of the wrong week and processed them through the system a second time.

7. For a sale, a data entry operator erroneously failed to enter the information for the salesmans department. As a result, the salesman received no commission for that sale.

8. Several remittance advices were batched together for inputting. The cash receipts clerk stopped for coffee, set them on a box, and failed to deliver them to the data input personnel.

Required

a. Identify the transaction-related audit objective(s) to which the misstatement pertains.

b. Identify one automated control that would have likely prevented each misstatement