The Auditor Has Determined That a Key Control in the Audit

question 52

Multiple Choice

The auditor has determined that a key control in the audit of the sales and collection cycle is that recorded sales are supported by authorized shipping documents and approved customer orders.What typical test of controls should be used in this situation?

• A)Examine a sample of duplicate sales invoices to determine that each on is supported by an authorized shipping document and approved customer order.
• B)Observe whether shipping documents are forwarded daily to billing and observe when they are billed.
• C)Examine a sample of sales invoices and agree prices to the authorized computer price list.
• D)Use audit software to trace postings from the batch of sales transactions to the subsidiary and general ledgers.

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Definitions:

Nominal Data

A type of categorical data for which the categories do not have a natural order or ranking.

Critical Value

A point on the scale of the test statistic beyond which we reject the null hypothesis; it depends on the chosen significance level.

Significance Level

The probability of rejecting the null hypothesis in a statistical test when it is actually true, usually set before the experiment.

Seat Belts

Devices aimed at protecting vehicle passengers from injurious motions that might occur in the event of an accident or abrupt halt.