The following are common audit procedures for tests of sales and cash receipts: 1. Obtain a...

 

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The following are common audit procedures for tests of sales and cash receipts: 1. Obtain a copy of the current price list and agree on a sample of invoices where they have been used. 2. Interview the sales team to understand the process for setting discounts and examine the sales discount report for evidence of review by the sales director. 3. Trace select sales journal entries to their supporting documents, such as the sales invoice, bill of lading, sales order, and customer order. 4. Use audit software to foot and cross-foot the sales journal and trace totals to the eral ledger to check for discrepancies. gen- 5. Trace credit entries in the accounts receivable master file to their sources to see whether they relate to cash collected, goods returned, bad debt written-off, or a credit memo. 6. Observe the endorsement of incoming checks and prelisting of cash receipts. 7. Observe whether the accountant regularly reconciles the company's bank account. 8. Examine the prelisting for proper account classification. 9. Account for the numerical sequence of sales invoices selected from the sales journal, and look for duplicate numbers or invoices outside the normal sequence. a. Identify whether each audit procedure is a test of control or a substantive test of transactions. b. State which transaction-related audit objective(s) each of the audit procedures fulfills. c. For each test of control in part a., state a substantive test that could be used to deter- mine whether there was a monetary misstatement. Required The following are common audit procedures for tests of sales and cash receipts: 1. Obtain a copy of the current price list and agree on a sample of invoices where they have been used. 2. Interview the sales team to understand the process for setting discounts and examine the sales discount report for evidence of review by the sales director. 3. Trace select sales journal entries to their supporting documents, such as the sales invoice, bill of lading, sales order, and customer order. 4. Use audit software to foot and cross-foot the sales journal and trace totals to the eral ledger to check for discrepancies. gen- 5. Trace credit entries in the accounts receivable master file to their sources to see whether they relate to cash collected, goods returned, bad debt written-off, or a credit memo. 6. Observe the endorsement of incoming checks and prelisting of cash receipts. 7. Observe whether the accountant regularly reconciles the company's bank account. 8. Examine the prelisting for proper account classification. 9. Account for the numerical sequence of sales invoices selected from the sales journal, and look for duplicate numbers or invoices outside the normal sequence. a. Identify whether each audit procedure is a test of control or a substantive test of transactions. b. State which transaction-related audit objective(s) each of the audit procedures fulfills. c. For each test of control in part a., state a substantive test that could be used to deter- mine whether there was a monetary misstatement. Required

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a Ident ify whether each audit procedure is a test of control or a substantive test of transactions ANS WER 1 This is a substantive test of transactio... View the full answer