You are conducting an audit of sales for James Smith Pty Ltd, a retail chain store with a computerized sales system in which computerised cash registers are integrated directly with accounts receivable, sales, perpetual inventory records and sales commission expense. At the time of sale, the sales clerks key-enter the following information directly into the cash register:

• Product number

• Quantity sold

• Unit selling price

• Store code number

• Sales clerk number

• Date of sale

• Cash sale or credit sale

• Customer account number for all credit sales.

The total amount of the sale, including GST, is automatically calculated by the system and indicated on the cash register's visual display. The only printed information for cash sales is the cash register receipt, which is given to the customer. For credit sales, a credit slip is prepared, and one copy is retained by the clerk and submitted daily to the accounting department.

A summary of sales is printed out daily in the accounting department. The summary includes daily and monthly totals by sales clerks for each store, as well as totals for each of 93 categories of inventory by store. Perpetual inventory and accounts receivable records are updated daily, but supporting records are limited primarily to machine-readable records.

REQUIRED

a. What major problems does the auditor face in verifying sales and accounts receivable?

b. How can the concept of test data be employed in this audit? Explain the difficulties the auditor would have to overcome in using test data.

c. How can generalised audit software be employed in this audit? List several tests that can be conducted using this approach.

d. The client is interested in installing several controls to signal cash register operators automatically when they have made an error. List four programmed controls the auditor could recommend to reduce the likelihood of these types of errors.

e. The client would also like to reduce the time it takes to key-enter the information into the cash register. Suggest several ways this could be accomplished, considering the information now being key-entered manually.