If the client's internal control for recording sales returns and allowances is evaluated as ineffective,
A) a larger sample may be needed to verify cutoff.
B) sampling is not appropriate.
C) all sales returns must be traced to supporting documentation.
D) all sales returns must be confirmed with the customer.

Question

Quizplus · Accepted Answer

When an auditor evaluates a client's internal control as ineffective, particularly regarding sales returns and allowances, they may decide to increase the sample size for testing to ensure a more thorough verification of cutoff and other related assertions. This approach helps in compensating for the perceived higher risk of misstatement due to the ineffective controls.

If the Client's Internal Control for Recording Sales Returns and Allowances