Question

The following is a partial audit program for the audit of cash receipts:

1. Review the cash receipts journal for large and unusual transactions.

2. Trace entries from the prelisting of cash receipts to the cash receipts journal to determine if each is recorded.

3. Compare customer name, date, and amount on the prelisting with the data on the cash receipts journal.

4. Examine the related remittance advice for entries selected from the prelisting to determine if cash discounts were approved.

5. Trace entries from the prelisting to the deposit slip to determine if each has been deposited.

Required:

1. Identify which audit procedures could be tested using attribute sampling.

2. What is the appropriate sampling unit for the tests in part (a)?

3. List the attributes for testing in part (a).

Answer 1

Ques 1

when using sampling , first rule is the auditor should decide the range of sampling

except for the first audit step rest can be sampled

Unusual and large transactions are to be thoroughly checked so that these are vetted properly and risk of material misstatement is mitigated , these cannot be sampled and hence checked properly

Ques 2

even though sampling is not advised on the unusual transactions but

but to emphasise on completeness and audit procedure to indicate there is prelisting of cash receipt

we can use date of prelisting of cash receipts is prepared.

\Note:look for year end entries carefully as management at the time of closing of books is more likely to deal in cash transactions

Ques 3

Audit Procedure	Attribute
Trace entries from the prelisting of cash receipts to the cash receipts journal to determine if each is recorded	Cash receipts in the prelisting are recorded in the cash receipts journal
Compare customer name, date, and amount on the prelisting with the data on the cash receipts journal.	Customer name, date, and amount are equal on the prelisting and cash receipts journal.
Examine the related remittance advice for entries selected from the prelisting to determine if cash discounts were approved.	Cash discounts were approved on the related remittance advice.
Trace entries from the prelisting to the deposit slip to determine if each has been deposited	Cash included in the prelisting has been included on the deposit slip.