The auditor has determined that a key control in the audit of the sales and collection cycle is that recorded sales are supported by authorized shipping documents and approved customer orders. What typical test of controls should be used in this situation?
A) Examine a sample of duplicate sales invoices to determine that each one is supported by an authorized shipping document and approved customer order.
B) Observe whether shipping documents are forwarded daily to billing and observe when they are billed.
C) Examine a sample of sales invoices and agree prices to the authorized computer price list.
D) Use audit software to trace postings from the batch of sales transactions to the subsidiary and general ledgers.

Question

Quizplus · Accepted Answer

Examining a sample of duplicate sales invoices to determine that each one is supported by an authorized shipping document and approved customer order is a typical test of controls that directly verifies the key control mentioned in the question. Observing the forwarding of shipping documents or using audit software to trace postings do not directly test the key control. Examining a computer price list only verifies pricing accuracy and does not directly test the key control.

The Auditor Has Determined That a Key Control in the Audit