Question

Which of the following is a test of controls for the transaction assertion of completeness for revenue?

1) Test a sample of sales invoices for authorized customer orders.
2) Review sales orders for proper credit approval.
3) Trace shipping documents to sales invoices and the sales journal.
4) Examine reconciliation of subsidiary ledger to general ledger control account.

Answer 1

3) Trace shipping documents to sales invoices and the sales journal.

The test of controls for the transaction assertion of completeness for revenue is to trace shipping documents to sales invoices and the sales journal. This test helps verify that all sales transactions have been properly recorded and included in the financial statements.

Step-by-step explanation:

The test of controls for the transaction assertion of completeness for revenue is option 3) Trace shipping documents to sales invoices and the sales journal. This test checks whether all sales transactions that occurred in a given period are recorded.

By tracing shipping documents such as packing slips or delivery receipts to sales invoices and the sales journal, the auditor can verify that all sales transactions have been properly recorded and included in the financial statements.

This test helps ensure that no sales transactions are missing from the records, providing assurance that the revenue completeness assertion is accurate.