Final answer:
The auditor is testing the occurrence assertion when tracing sales transactions recorded in the sales journal back to customer orders and shipping documents. This ensures the sales transactions have actually taken place and are not fictitious or errors.
Step-by-step explanation:
When an auditor traces a sample of sales transactions recorded in the sales journal back to the customer orders and shipping documents, they are testing the occurrence assertion. The occurrence assertion is concerned with whether the sales transactions have actually occurred or not. By tracing transactions to the customer orders and shipping documents, the auditor is looking for evidence that these sales did indeed take place and that they are not fictitious or recorded in error.
In auditing, there are several assertions that auditors test to ensure the accuracy and integrity of financial statements. These include completeness, accuracy, authorization, classification, and cutoff, in addition to occurrence. The completeness assertion would look for whether all transactions that should have been recorded have been recorded, while the authorization assertion verifies that all transactions have been properly authorized. Cutoff procedures ensure transactions have been recorded in the correct accounting period. However, in this specific scenario, by investigating if each sale is linked to actual orders and deliveries, the auditor is specifically addressing occurrence, to confirm that each recorded sale represents a real transaction.
The process of tracing helps auditors mitigate the risk of including transactions that weren't actual sales, ultimately ensuring that the revenue figures reported in the financial statements are reliable and based on real business activities.