In the audit of ABC, Jack's audit team foundthat overstated sales caused net income, retained earnings, current assets, working capital, and total assets to be overstated. Overstated cash collectionsdid not change the total current assets or total assets, but they increased the amount of cash and decreased the amount of accounts receivable by an offsetting amount, affecting the quick ratio that ABC monitors. ABC recorded sales of $672,000 and gross profit of $268,800 over the January 1-4 period. Cash Collections on customers' accounts amounted to $800,000.

ABC generally has good control policies and procedures related to authorization of transactions for accounting entry, and the accounting manual has instructions for recording sales transactions in the proper accounting period. The company closes the accounting process each Friday at 5 PM to prepare weekly management reports. The year-end (cut-off) date is December 31, and, in 20X0, December 31 was a Monday. However, the accounting was performed through Friday as usual, and the accounts were closed for the year on January 4.

Audit Trail

• All the entries were properly dated after December 31 including sales invoices, cash receipts, and the shipping documents.
• However, the trial balance of the financial statements were prepared from was dated December 31, 20X0, even though the accounts were actually closed January 4.
• Nobody noticed the slip of a few days because the Friday closing was normal.

Requirement

1. Audit objective
2. Relevant controls that should be there.
3. Tests of controls
4. Tests of details of balances