QUESTION 16.25 (page 500).
The following are audit procedures in the sales and collection cycle :
1. Examine a sample of shipping documents to determine whether each has a sales invoice number included on it.
2. Discuss with the sales manager whether any sales allowances have been granted after the balance sheet date that may apply to the current period.
3. Add the columns on the aged trial balance and compare the total with the general ledger.
4. Observe whether the controller makes an independent comparison of the total in the general ledger with the trial balance of accounts receivable.
5. Compare the date on a sample of shipping documents throughout the year with related duplicate sales invoices and the accounts receivable master file.
6. Examine a sample of customer orders and see if each has a credit authorisation.
7. Compare the date on a sample of shipping documents a few days before and after the balance sheet date with related sales journal transactions.
8. Compute the ratio of allowance for uncollectible accounts receivable and compare with previous years.
9. Examine the sample of noncash credits in the accounts receivable master file to determine if the internal auditor has initialled each, indicating internal verification.
a. For each procedure, identify the applicable type of audit evidence.
b. For each procedure, identify which of the following it is :
(1) Test of control
(2) Substantive test of transactions
(3) Analytical procedure
(4) Test of details of balances
c. For those procedures you identified as a test of control or substantive test of transactions, what transaction-related audit objective or objectives are being satisfied ?
d. For those procedures you identified as a test of details of balances, what balance-related audit objective or objectives are being satisfied ?
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