FINANCIAL ACCOUNTING
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ISBN: 9781259964947
Author: Libby
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Transcribed Image Text:in the same industry (it was not a specially made software). It was sold by a
software company known for their highly rated products.
Which management assertions apply to this control?
5. The computer assigns a number to every sales invoice.
Which management assertions apply to this control?
6. Input validation checks (application controls) are applied to every bill
to ensure the accuracy of the billiling process.
Which management assertions apply to this control?
7. The accounts receivable employee matches every invoice
with the delivery receipts and accounts for them in numerical
sequenc
Which management assertions apply to this control?
8. Monthly statements are mailed to customers.
Which management assertions apply to this control?
9. The computer assigns a number to every delivery receipt.
Which management assertions apply to this control?
10. All sales returns are approved by the vice president of sales.
Which management assertions apply to this control?
Transcribed Image Text:Problem 7: Auditing Sales/Revenue Transactions
When an auditor needs to obtain an understanding of the overall internal control
first needs to consider the elements of the control environment. To assist the auditor in
assessing the level of
control risk, the following tests of controls were designed to allow the auditor to
Determine which of the four management assertion(s) apply to each individual sales (revenue) control
being discussed. Hint: many have more than one assertion.
Management
Existence &
Rights
Complet
Valuation
1. The company segregates the duties for authorizing, approving customer
and accounting for all sales transactions. They have different employees for
Which management assertions apply to this control?
2. Every month, the accounting manager reconciles the accounts receivable master
Which management assertions apply to this control?
3. The computer is programmed to verify the customer order clerk's assigned
before any sales data can be inputted.
Which management assertions apply to this control?
4. Years ago, the company purchased a software package that was used by
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- 13. When the auditors obtain an understanding of internal control for the financing cycle documentation will frequently include a written description as well as a(n): Group of answer choices Decision table List of audit objectives Internal control questionnaire Summary of tests of controlsarrow_forwardFrancona Madden, an audit manager, considered the control risk assessments listed in theleft column of the following table in evaluating A. Cardinal’s internal control over salestransactions. The sample sizes for the substantive procedures of the customer accountsreceivable are shown to the right of each control risk. What risk of overreliance (ROO)could be assigned for tests of controls at each control risk level? Control Risk Accounts Receivable Sample ROO 0.20 400 ? 0.50 390 ? 0.80 350 ? 0.90 190 10% a. From top to bottom: 5 percent, 10 percent, 1 percent.b. From top to bottom: 10 percent, 1 percent, 5 percent.c. From top to bottom: 1 percent, 10 percent, 5 percent.d. From top to bottom: 1 percent, 5 percent, 10 percent.arrow_forwardAs an auditor, it is important to gain a comprehensive understanding of every aspect of a client’s internal control. This helps in evaluating control risk and preparing for the audit of the client’s financial statements. Choose one of the following questions to discuss: For what purposes should an auditor use their understanding of internal control components to plan an audit? What factors should an audit team consider when trying to reduce the planned assessed level of control risk below the maximum? What are the documentation requirements for a client’s internal control and assessed level of control risk?arrow_forward
- Auditors must consider these five components of COSO internal controls when understanding the client and its internal controls Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a control environment, tone at the top, risk assessment, segregation of duties, monitoring b control environment, tone at the top, risk assessment, control activities, monitoring c control activities. control environment, risk assessment, info and communications, monitoring d control activities, control environment, monitoring, tone at the top, info and commumicationarrow_forwardAuditing Sales/Revenue Transactions When an auditor needs to obtain an understanding of the overall internal control of a company, the auditor first needs to consider the elements of the control environment. To assist the auditor in assessing the level of control risk, the following tests of controls were designed to allow the auditor to determine if the company’s related controls were operating effectively in the revenue cycle. Determine which of the four management assertion(s) apply to each individual sales (revenue) control being discussed. Hint: many have more than one assertion. Management Assertions: Existence & Occurrence, Rights, Completeness, Valuation 5. The computer assigns a number to every sales invoice. Which management assertions apply to this control? 6. Input validation checks (application controls) are applied to every bill to ensure the accuracy of the billing process. Which management assertions apply to this control?…arrow_forwardFinancial audit Q&A What is the process used by auditors in conducting tests of control in testing documents and supporting control files?arrow_forward
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