Question

You are an auditor of a retailer that operates entirely online and has no physical inventory on site beyond that necessary to operate. What auditing techniques would you use to check on sales, cost of goods sold, expenses, receivables, and cash? You may use a specific firm as an example.

Answer 1

Following auditing techniques can be used to check sales, COGS, expense, recievable and cash -

1. The sales can be checked by cross verifing the order recieved from the customer. Sales should be recognised only after the period of returning the order has expired.
   
2. Cash has been properly recorded in the book of accounts. Physical verification of cash with respect to the Cash book should be performed.
   
3. Expenses such as delivery cost, courier cost, commission expense are appropriately recorded and accrual of expense are made at the end of financial year.
   
4. In the online business payment is made either in cash or using card payment therefore acccount recievable should not exist in the account. Even though there are certain balance then it should be thoughroughly examined.
   
5. Prepare the cost sheet to arrive at the various element like variable expense, fixed cost, Cost of good sold, profit etc.

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