9-25 l!:IJ Assume the auditor plans to test controls over the shipment and recording of sales...

9-25 l!:IJ Assume the auditor plans to test controls over the shipment and recording of sales transactions. Identify the controls that the auditor ,vould expect to find to achieve the objective that all transactions are recorded correctly, and in the correct period. For each control identified, indicate ho,v the auditor ,vould test whether the control operated effectively.

Solutions

Expert Solution

Following can be the various cases and test controls accordingly :-

1 . In order to prevent any fictitious sales :-

i. Segregation of duties regarding shipping function , order entry and billing function will ensure that fictitious sales are not recorded

Auditor should observe personally whether proper segregation of duties has been made in order to test whether controls are operating effectively.

2 . In order to ensure proper recording of revenue when goods are shipped

i. Maintain numerical sequence of shipping document and sales invoice to ensure proper recording of sales.

ii. Regularly and frequently match shipping document with the sales invoice to ensure none of the goods shipped skipped from being recorded.

III . Sales invoice should be reconciled with daily sales report.

3. In order to avoid recording sales in wrong accounting period :-

i . Shipping document forwarded to billing function daily.

ii . Daily billing of goods being shipped will help to record the sales in the correct accounting period.

ekkarill92 answered 1 year ago

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