Question

b. Jenny and Sam are the auditors for the AAA audit firm. They discuss an audit
program for the sales account. Jenny and Sam disagree about whether they
should use procedure (1) or (2) below to test the Occurrence assertion for the
sales account:
Procedure (1): Select a sample of sales invoices, delivery dockets and customer
orders and agree the details to the details recorded in the sales journal.
Procedure (2): Select a sample of sales from the sales journal and agree the
details in the journal to the sales invoices, delivery dockets and customer orders.
Required:
Advise the senior auditor of AAA audit firm:
1. Which procedure provides evidence about the Occurrence assertion? Explain
your answer.
2. Which assertion does the other procedure provide evidence about? Explain your
answer.

Answer 1

1)

Occurrence Assertion - the assertion that all the transactions and events recorded in the financial statements have properly recorded and classsified in the respective ledgers which are related to the entity is called occurrence assertion

Procedure (1) is the more efficient test comparitively than the Procedure (2)

Reson -

Procedure (1) - verifying all the sales documents of an entity is not practically possible.

so by sampling processs i.e. selecting of some sales invoices on sample basis and checking whehter these sales invoices are recorded in the journal with appropriate entries, have to check with the appropriate delivery documents to customers inorder to evaluate whether the mentioned goods or services are supplied properly or not can be evaluated, all the sales invoices are need to be reconcilied with the customers orders and also need to check with sales journal too

2)

Procedure - (2) - this is more emphasised on checking the sales journal that is only recorded entries - in this there might be chancec of non recorded sales incvoices.