Question

When comparing prices and terms on a sample of sales invoices with the authorized price list and terms of trade, the auditor is testing the ____________ assertion?

1) cutoff
2) authorization
3) occurrence
4) completeness

Answer 1

The auditor is testing the authorization assertion when comparing sales invoices to authorized price lists and terms of trade, ensuring all transactions are properly approved.

Step-by-step explanation:

When comparing prices and terms on a sample of sales invoices with the authorized price list and terms of trade, the auditor is testing the authorization assertion. This assertion verifies that all transactions have been properly authorized before they are recorded, ensuring that the terms and conditions of sales are in accordance with management's directives and that the sales have indeed been authorized by the entity. The authorization assertion relates directly to the company's internal control practices and helps prevent unauthorized transactions that could result in financial misstatements.