The auditor has decided that there is a risk of material misstatement with respect to sales revenue.Which of the following audit tests should the auditor use to quantify the potential error?
A)discuss the process used to assign credit limits with the sales manager and the controller
B)send external confirmations to customers with accounts receivable balances
C)determine whether all sales tested have a supporting customer purchase order
D)determine whether all sales tested have a matching bill of lading

Question

Quizplus · Accepted Answer

Sending external confirmations to customers with accounts receivable balances would provide direct evidence of the accuracy of sales revenue, as the customers would confirm the amounts they owe. The other options would not necessarily provide sufficient evidence to quantify potential errors in sales revenue. A discussion with the sales manager and controller about credit limits may inform the auditor's understanding of the company's credit policies, but would not necessarily provide evidence of the accuracy of sales revenue. Checking for supporting customer purchase orders and matching bill of ladings would provide evidence of the completeness of sales, but not necessarily the accuracy.

The Auditor Has Decided That There Is a Risk of Material