Question

Choose from the option list provided the procedure the auditor could implement to test the operating effectiveness of the internal control for each of the following situations. Each choice may be used once, more than once, or not at all.

1. To determine that all credit sales transactions of an entity are recorded.
2. To detect a failure to post invoices to customers' accounts ledger.
3. To detect failure to invoice a shipment.
4. To ensure sales orders are properly authorized.
5. To determine goods sent to customers are based only on authorized sales orders.
6. To verify the completeness of cash receipts for cash sales at a retail outlet
7. To ensure cash receipts are deposited.

Answer 1

Note: Missing word (list) are attached as picture below

1. To determine that all credit sales transaction of an entity are recorded

Procedure to implement: Match pre-numbered shipping documents with entries in sales journal.

2. To detect a failure to post invoice to customer account ledger

Procedure to implement: Trace Sales invoices to account receivable subsidiary ledger

3. To detect failure to invoice a shipment

Procedure to implement: Vouch bill of lading file to approved sales invoice

4. To ensure sales orders are properly authorized

Procedure to implement: Confirm sales orders were sent to the credit department

5. To determine goods sent to customers are based only on authorised sales order

Procedure to implement: Match bill of lading file to approved sales order

6. To verify the completeness of cash receipts for cash sales at a retail outlet

Procedure to implement: Observe consistency of employee's use cash registers and tapes

7. To ensure cash receipts are deposited

Procedure to implement: Compare daily cash receipts total with bank deposits