Required:

The controls listed below relate to a system for processing sales transactions. Each numbered item indicates an error or irregularity that could occur and specifies a control procedure that could prevent or detect it. Identify the control objective satisfied by the auditee's control procedure. Write the test of controls audit program by specifying an effective control test to produce evidence about the auditee's performance of the control procedure. Hint:A control test is a two-part statement consisting of (1) identification of a data population from which a sample can be drawn and (2) expression of an action to take.

4. The company needs to classify sales to subsidiaries apart from other sales so that the consolidated financial statement eliminations will be accurate. That is, the company wants to avoid the error of understating the elimination of intercompany profit and, therefore, overstating net income and inventory. The control procedure is as follows. A billing supervisor reviews each invoice copy to see whether the billing clerk imprinted sales to the company's four subsidiaries with a big red "9" (the code for intercompany sales). The supervisor does not sign the invoices.