As part of the engagement team for the audit of JA Tire Manufacturing for the year ended December 31, 2019, you are responsible for auditing the sales and collection cycle. If you have not done so already, visit the textbook website to download the data file “JATireSales.xls” provided to your audit firm by the company. The manager has instructed you to read the JA Tire Manufacturing system description provided on the first tab of the Excel file before attempting this assignment to familiarize yourself with the sales process and the relevant worksheets and terminology. This file contains sales transaction information for the year ended December 31, 2019. Open the data file and review the contents for each of the worksheets (Sales Order, Bills of Lading, Invoice, Cash Receipts, Customer Master, and Product Master). You will use this data file to perform the following substantive tests of transactions for sales and cash receipts. Use Excel or audit software such as ACL or IDEA to perform the testing.

The company issues sales invoices in sequential order. Use the Invoice file to determine whether there are any gaps or duplicates in the sales invoice sequence.

 Company policy is that invoices are prepared after the invoicing function receives the notification of shipment to the customer. Verify that each shipment in the Bill of Lading file is associated with an invoice in the Invoice file. 

Company policy is that invoices should be prepared within five days of shipment. Identify any sales included in the Invoice file that were not invoiced within five days of shipment. 

Verify that all sales included in the Invoice file are to authorized customers included in the Customer Master file. Verify that the quantity and product number billed on the sales invoice matches the same information on the bill of lading and sales order (three-way match using the Invoice, Bill of Lading, and Sales Order files). 

Determine that the total amount of the invoices included in the Invoice file (in the Amount column) is properly computed based on the quantities shipped and invoice prices.

Indicate the audit objective(s) tested by each of the six audit procedures listed above. 

Document any exceptions identified in your testing, including associated document numbers. 

Assume your initial assessment of control risk was low for each of the seven transaction-related audit objectives. Based on the exceptions found, indicate which audit objective(s) should have an increase in control risk.