Joe Costa, an Auditor, Is Planning Tests of Controls Over

question 57

Multiple Choice

Joe Costa, an auditor, is planning tests of controls over cash receipts. There are 7000 receipts and he plans to vouch 30 picked haphazardly from the cash receipts journal for the period 1 January to 30 September 20X0. This audit approach may be described most precisely as:

• A) statistical sampling.
• B) non-statistical sampling.
• C) a non-sampling technique called selective examination.
• D) None of the given answers.

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Definitions:

Cash Dividends

A distribution of a portion of a company's earnings, decided by the board of directors, paid to shareholders in cash.

Operating Activities

Activities that are directly related to the day-to-day operations of a business, generating revenue and expenses.

Comparative Balance Sheet

A financial statement presenting a company's assets, liabilities, and equity at two or more points in time for comparative purposes.

Indirect Method

A method used in cash flow statements to adjust net income for changes in non-cash accounts to calculate net cash provided by operating activities.