When Evaluating Internal Control of an Entity That Processes Revenue

question 44

Multiple Choice

When evaluating internal control of an entity that processes revenue transactions on the Internet, an auditor would be most concerned about the

• A) Potential for computer disruptions in recording sales.
• B) Lack of sales invoice documents as an audit trail.
• C) Frequency of archiving and data retention.
• D) Inability to establish test data.

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Definitions:

Sales Allowance

A reduction in the price of goods sold, usually given after the sale to account for defects or errors in shipment.

Refund Liability

An obligation to return funds to a customer, often recognized in situations where returns or cancellations are expected.

Freight Paid

The cost incurred by a company to transport goods, often recognized as an expense in the income statement.

Operating Expense

Costs associated with the day-to-day operations of a business, excluding the cost of goods sold.