When Tracing a Sample of Shipping Documents from Throughout the Year

question 44

Multiple Choice

When tracing a sample of shipping documents from throughout the year to the details of the sales invoices and to the sales journal and customers' accounts receivable subsidiary ledger, the auditor is testing the ________ assertion.

• A)classification
• B)cutoff
• C)existence
• D)completeness

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Definitions:

Historical Cost Principle

An accounting principle that states assets should be recorded and reported at their original purchase price.

FASB's Proposal

A suggested change or addition to accounting standards published by the Financial Accounting Standards Board.

Employee Stock Options

A privilege, sold by one party to another, that gives the buyer the right, but not the obligation, to buy (call) or sell (put) a stock at an agreed-upon price within a certain period or on a specific date.

Convertible Bonds

Bonds that can be converted into a predetermined number of the issuing company's shares, usually at the discretion of the bondholder.