The Auditor Is Concerned That a Client Is Failing to Bill

question 18

Multiple Choice

The auditor is concerned that a client is failing to bill customers for shipments. An audit procedure that would gather relevant evidence would be to

• A) select a sample of duplicate sales invoices and trace each to related shipping documents.
• B) trace a sample of shipping documents to related duplicate sales invoices.
• C) trace a sample of Sales Journal entries to the Accounts Receivable subsidiary ledger.
• D) compare the total of the Schedule of Accounts Receivable with the balance of the Accounts Receivable account in the general ledger.

---

Definitions:

Financial Statements

Structured documentation of financial transactions and status of a company, individual, or different entity.

Vertical Analysis

A method of financial statement analysis in which each entry of the main categories of the financial statements is listed as a percentage of another item.

Gross Profit

The financial gain made after subtracting the cost of goods sold from the total revenue generated from sales.

Accounts Receivable Turnover

A financial ratio that measures how frequently a company collects its average accounts receivable balance in a period.