The Auditor Has Determined That a Key Control in the Audit

question 4

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 one 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:

Capital Gains Return

The profit achieved from the sale of a security or investment which has increased in value over the holding period.

Marvel Entertainment

is a multimedia company known for its extensive portfolio of comic book characters, television shows, and blockbuster movies within the Marvel Cinematic Universe.

Geometric Return

The average rate of return on an investment that accounts for compound interest over multiple periods.

Investment

Allocation of resources, typically money, with the expectation of generating an income or profit.