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:

Cash Inflows

The total amount of money being received by a company from its various business activities, such as sales revenue, investments, and loans.

Cash Outflows

Cash outflows represent money leaving a business, covering expenses like payroll, rent, materials, and other operational costs, crucial for cash flow management.

Present Value

The current value of a future amount of money or stream of cash flows, discounted back to the present using a specific discount rate.

Equal Annual Cash Flows

A series of identical cash amounts that occur at equal intervals over a period of time, commonly used in financial analysis.