auditor is concerned that fictitious sales have been recorded. The best audit pr

Question

auditor is concerned that fictitious sales have been recorded. The best audit procedure to identify the existence of the fictitious sales would be to a. select a sample of recorded invoices and trace to shipping documents (bills of lading) to b. select a random sample of shipping documents (bills of lading) and vouch to the sales invoice c. select a sample of customer purchase orders and trace through to the generation of a sale d. select a sample of invoices and vouch to a customer purchase order to determine whether a verify shipment of goods. to determine whether the invoice was properly recorded. invoice. valid customer actually exists

Explanation / Answer

Correct Answer (D ) Select a sample of invoices and vouch to a customer purchase order to determine whether a valid customer actually exist.

Reason

Selecting a shipping document will do no good as shipping document will lead to sales actually done similarly sample of customer order will only tell about actual sales. To track any fictitious sales it is necessary to select invoices and vouch to a customer purchase order and see whether a valid customer actually exists.

Sales can be done without shipping documents too like customer may have taken delivery of goods from factory gate.

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