An Audit Team Is Auditing Sales Transactions

question 91

Multiple Choice

An audit team is auditing sales transactions. One step is to vouch a sample of debit entries from the accounts receivable subsidiary ledger back to the supporting sales invoices. The purpose of this audit procedure is to establish that:

• A)sales invoices represent bona fide sales.
• B)all sales have been recorded.
• C)all sales invoices have been properly posted to customer accounts.
• D)entries in the accounts receivable subsidiary ledger were properly invoiced.

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Definitions:

Consumer Surplus

The difference between the total amount consumers are willing to pay for a good or service and the total amount they actually pay; a measure of consumer benefit.

Producer Surplus

The difference between the amount a producer is actually paid for a good compared to the minimum amount they would accept for the good.

Excess Supply

A market condition where the quantity of a commodity available for sale exceeds the quantity demanded at the current price.

Producer Surplus

The difference between what producers are willing to accept for a good or service and what they actually receive, representing their gain.