Question

At which point in an ordinary sales transaction of a wholesaling business would a lack of specific authorization be of least concern to the auditor?

A) Granting of credit.
B) Shipment of goods.
C) Determination of discounts.
D) Selling of goods for cash.

Answer 1

In a wholesaling business, the concern for specific authorization by an auditor is lowest during cash sales because the risks are lower compared to credit transactions or those involving complex discounts.

Step-by-step explanation:

In wholesaling businesses, a lack of specific authorization would be of least concern to an auditor during the selling of goods for cash. This is because cash sales involve immediate payment and pose less risk when compared to other transactions that could involve credit, longer payment terms, or complex discount structures. Here are a few ways a seller might reassure a buyer who is dealing with imperfect information:

• Providing detailed product information and specifications to highlight the quality and features of the goods.
• Offering customer reviews and testimonials to establish trust and credibility.
• Proposing generous return policies or warranties to mitigate the buyer's perceived risk.

Sales transactions with immediate payment are less susceptible to authorization issues since the transaction is straightforward with less potential for fraud or misunderstandings.