The Auditor Would Like to Design a Test of Control

question 12

Multiple Choice

The auditor would like to design a test of control to test that unit selling prices are obtained from the price list master file of approved prices.Which of the following typical tests of controls would be suitable?

• A)Compare prices used on sales invoices to the authorized customer purchase order.
• B)Review changes to the price file throughout the year for proper authorizations and trace prices to copies of sales invoices.
• C)Use analytical review to compare total sales last year to total sales this year.
• D)Discuss the process used to authorize sales prices with the sales manager and the controller.

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Definitions:

Order Quantity

The amount of stock or goods a company purchases or plans to purchase in a single order.

Operating Cycle

The amount of time it takes for a business to buy inventory, sell that inventory, and collect cash from the sale.

Cash Cycles

The duration it takes for a business to convert its investments in inventory and other resources back into cash flows from sales.

Accepts Cash

A phrase indicating that a business or entity is willing to receive cash as a form of payment for goods or services.