Question

Evaluate the following​ statement: "Tests of sales and cash receipts transactions are such an essential part of every audit that I like to perform them as near the end of the audit as possible. By that time I have a fairly good understanding of the​ client's business and its internal controls because​ confirmations, cutoff​ tests, and other procedures have already been​ completed." ​(Select all answers that​ apply.) A. As long as the auditor has performed sufficient analytical procedures to evaluate the financial information through analysis of plausible relationships among financial and nonfinancial​ data, it is acceptable to perform tests of sales and cash receipts transactions as near the end of the audit as possible. B. The auditor should attempt to understand the entity and its​ environment, including internal​ controls, as early as practical through the analysis of the accounting​ system, tests of​ controls, and substantive tests of transactions. C. The primary purpose of testing sales and cash receipts transactions is to evaluate the internal controls so that the scope of the substantive tests of the account balances may be set. If the auditor performs the tests of details of balances prior to testing internal​ controls, no benefit will be derived from the tests of controls. D. None of the above.

Answer 1

Answer:B. The Auditor should attempt to understand the entity and it's environment, Including Internal controls as early as practical through the analysis of the accounting system, test of controls and substantive test of transaction.

Step-by-step explanation:

The first major duty of the Auditor is to understand the entity and it's environment to determine it's inherent risks, to evaluate the existing Internal controls to determine it's workability which invariably determines the level of substantive test to be carried out.

The test of sales and cash receipt thus not hereald an audit work but are carry out to confirm the strength or weakness of the internal control already documented.