Identify Whether the Following Tests Are Tests of Controls, Substantive

question 62

Essay

Identify whether the following tests are tests of controls, substantive analytical procedures, tests of details of transactions, or tests of details of account balances.
1)Select a sample of customer receivables and send positive confirmations to each customer.
2)Examine monthly bank reconciliations for the internal auditors' initials indicating internal verification and review of the reconciliation.
3)Select a sample of entries in the sales journal and trace each to the shipping documents.
4)Compute receivable turnover and compare with previous years.
5)For a sample of new customers, determine whether credit approval was properly administered and documented.
6)Compare the dates on a sample of sales invoices with the dates of shipment and the dates the transactions were recorded in the sales journal.

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Definitions:

Adjusting Journal Entry

A journal entry made at the end of an accounting period to allocate income and expenditures to the period in which they actually occurred.

Insurance Expense

The cost attributed to procuring insurance for business operations, properties, liability, and other risk management purposes, treated as an expense on the income statement.

Prepaid Insurance

An asset account representing insurance payments made in advance for coverage that extends to future periods.

Accrued Revenue

Revenue that has been earned but not yet received in cash or recorded, representing goods or services provided to a customer in one accounting period that are paid for in a later period.