The Auditor Uses a Variety of Procedures to Test Whether

question 74

Multiple Choice

The auditor uses a variety of procedures to test whether controls effectively.These procedures may all of the following except:

• A)Take a sample of purchase orders and trace them through the system to determine whether (a)there was proper review of credit,and (b)credit authorization or denial was proper.
• B)Take a sample of recorded items (accounts payable)and send a positive confirmation to the related vendors to determine whether the balance is properly stated.
• C)Take a sample of recorded items (accounts receivable)and trace back to the credit approval process to determine that it was performed appropriately.
• D)Use a computer audit program to read all accounts receivable and develop a print- out of all account balances that exceed their credit authorization.

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Definitions:

Credit Period

The duration of time a buyer is given by a seller to pay for a purchase.

Cash Discount

An incentive offered by sellers to encourage buyers to pay their invoice ahead of the due date.

Discount Period

The time frame between the date a bill is issued and its payment date, within which payment may be made at a discount.

Credit Report

A detailed breakdown of an individual's credit history prepared by a credit bureau, used by lenders to determine creditworthiness.