Question
During a discussion, one auditor noted that her approach to testing sales transactions was to select a random sample of recorded sales and trace back
During a discussion, one auditor noted that her approach to testing sales transactions was to select a random sample of recorded sales and trace back through the system to supporting documents, noting that all items billed were shipped and were invoiced at correct prices. She stated that she then had good confidence about the correctness of the sales account, and, therefore, having performed a dual-purpose test, the remaining work on sales (assuming the procedures also evidenced the working of control procedures) could be limited. A second auditor disagreed. Her approach was to select evidence of shipments, such as prenumbered shipping documents, and then trace forward through the system to the actual invoice, noting the existence of control procedures and the correctness of the invoice processing. If no exceptions were noted, however, she agreed with the first auditor that the remaining audit work on the sales account could be limited.
a. Which auditor is right, or are both right? Explain. b. What assertion is tested by the second auditor? c. What is a dual-purpose test? Explain whether the tests performed by both of the auditors would be considered dual-purpose tests.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started