The following are common audit procedures for tests of sales and cash receipts:

Question

The following are common audit procedures for tests of sales and cash receipts:

1. Compare the quantity and description of items on duplicate sales invoices with related shipping documents.

2. Trace recorded cash receipts in the accounts receivable master file to the cash receipts journal and compare the costumer name, date, and amount of each one.

3. Examine duplicate sale invoices for an indication that unit selling prices were compared to the approved price list.

4. Examine duplicate sale invoices to determine whether the account classification for sales has been included on the document.

5. Examine the sales journal for related-party transactions, notes receivable, and other unusual items.

6. Select a sample of costomer orders and trace the document to related shipping documents, sales invoices, and the accounts receivable master file for comparison of name, date, and amount.

7. Perform a proof of cash receipts.

8. Examine a sample of remittance advices for approval of cash discounts.

9. Account for a numerical sequence of remittance advices and determine whether there is a cross-reference mark for each one, indicating that it has been recorded in the cash receipts journal.

Questions

a. Identify whether each audit produce is a test of control or a substantive test of transactions.

b. State which transaction-related audit objective(s) each of the audit procedures fulfills.

c. For each test of control in part a, state a substantive test that could be used to determine whether there was a monetary misstatement.

Questions Test of control or a substantive tests of transactions 1. 2. 3. 4. 5. 6. 7. 8. 9.

Explanation / Answer

b. Test of control check the autneticity and accuracy of the transaction whereas the substantive test includes detailed checking of transactions in order to certfiy the genuiness of transaction.

c. 3. Detailed checking of sales invoice with that of the sales journal and customer copy and obtain third party confirmation from the debtors.

4. Detailed checking of sales invoice with that of the sales journal and customer copy and obtain third party confirmation from the debtors.

6. Detailed checking of sales invoice with that of the sales journal and customer copy and obtain third party confirmation from the debtors and cross verfication of the same with the shipping documents.

8. Cross check the cash discount with the discount policy and obtain evidence as to whether the cash discount is genuine in nature.

9. Cross check the cash receipt journal and physically verfiy the cash as on date.

uestions Test of control or a substantive tests of transactions 1. Substantive test 2. Substantive test 3. Test of control 4. Test of control 5. Substantive test 6. Test of control 7. Substantive test 8. Test of control 9. Test of Control

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