The Following Are Audit Procedures in the Sales and Collection

question 91

Essay

The following are audit procedures in the sales and collection cycle.
1.Inspect a sample of shipping documents to determine if each has a sales invoice number included on it.
2.Discuss with the sales manager whether any sales allowances have been granted after the balance sheet date that may apply to the current period.
3.Add the columns on the aged trial balance and compare the total with the general ledger.
4.Observe whether the controller makes an independent comparison of the total in the general ledger with the trial balance of accounts receivable.
5.For the month of May,count the approximate number of shipping documents filed in the shipping department and compare the total with the number of sales invoices in the sales journal.
6.Compare the date on a sample of shipping documents throughout the year with related duplicate sales invoices and the accounts receivable master file.
7.Examine a sample of customer orders and see if each has a credit authorization.
8.Send letters directly to former customers whose accounts have been written off as uncollectible to determine if any have actually been paid.
9.Examine the master file of accounts receivable to see if each has an indication of "C" for a regular customer,"N" for interest-bearing receivables,and "R" for related parties.
10.Compare the date on a sample of shipping documents a few days before and after the balance sheet date with related sales journal transactions.
Required:
For each procedure,identify the type of evidence being used.For each procedure,identify either the transaction-related audit objective(s)being met or the balance-related audit objective(s)being met.

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Definitions:

Significant Influence

The capacity to participate in the financial and operating policy decisions of an investee, but not full control or joint control over those policies.

Income Tax Rate

The percentage of income that is paid to the government as tax, which can vary by income level, jurisdiction, and type of taxpayer.

Dividends Declared

The announcement by a company's board of directors of the intention to pay dividends to shareholders.

Book Value

The net value of a company's assets minus its liabilities, as recorded on its balance sheet, often used to assess its financial health.