Part 7 Audit Philosophy and Direction of Tests (30 points) We considered broad "accounting systems involving the Sales Cycle AND Inventory Observation to illustrate the direction of testing involving the test for overstatement or understatement. Requirements: 1. Consider THREE ADJACENT pieces of the sales cycle ("Sales Order" can be used) and discuss the proper direction of testing for Sales for UNDERstatement. 2. In an inventory observation, discuss the proper direction for taking test counts to test for OVERstatement of inventory. 3. The double-entry accounting system conceptually can be used to gain audit efficiencies. Use "journal entries" and explain how (A) Sales is tested for overstatement by testing another account; and (B) how Accounts Receivable is tested for understatement by testing another account. 4. What type of evidence is used to test sales for UNDERstatement? Discuss briefly. 1. Sales for UNDERstatement 2. Physical Inventory testing for OVERstatement 3A. Journal entries & Discussion. Another account and Sales. 3B. Journal entries & Discussion. Another account and Accounts Receivable. 4. Sales for UNDERstatement Discuss Write Type of Evidence Part 7 Audit Philosophy and Direction of Tests (30 points) We considered broad "accounting systems involving the Sales Cycle AND Inventory Observation to illustrate the direction of testing involving the test for overstatement or understatement. Requirements: 1. Consider THREE ADJACENT pieces of the sales cycle ("Sales Order" can be used) and discuss the proper direction of testing for Sales for UNDERstatement. 2. In an inventory observation, discuss the proper direction for taking test counts to test for OVERstatement of inventory. 3. The double-entry accounting system conceptually can be used to gain audit efficiencies. Use "journal entries" and explain how (A) Sales is tested for overstatement by testing another account; and (B) how Accounts Receivable is tested for understatement by testing another account. 4. What type of evidence is used to test sales for UNDERstatement? Discuss briefly. 1. Sales for UNDERstatement 2. Physical Inventory testing for OVERstatement 3A. Journal entries & Discussion. Another account and Sales. 3B. Journal entries & Discussion. Another account and Accounts Receivable. 4. Sales for UNDERstatement Discuss Write Type of Evidence