The Auditor Would Like to Design a Test of Control

question 25

Multiple Choice

The auditor would like to design a test of control to test that there is a separation of duties between billing,recording sales,and handling of cash receipts.Which of the following typical tests of controls would be suitable?

• A)Match the amounts billed to the amounts recorded.
• B)Verify that sales have been recorded in the proper period.
• C)Trace cash receipts to the duplicate bank deposit slips.
• D)Inquire about the duties of the accounting personnel.

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Definitions:

Consumer Surplus

The difference between the total amount that consumers are willing and able to pay for a good or service and the total amount that they actually pay.

Complementary Goods

Products or services that are typically consumed together, where the demand for one increases the demand for the other.

Inelastic

Describing demand that changes little with price fluctuations; consumers’ buying habits are not significantly affected by price changes.

Price Elasticity

The measure of how much the quantity demanded of a good responds to a change in the price of that good, demonstrating the sensitivity of consumers to price changes.