Question
Sue and Carrie are discussing the audit of one of their major client's revenue accounts. Sharon mentions to Karen that being a relatively new and
Sue and Carrie are discussing the audit of one of their major client's revenue accounts. Sharon mentions to Karen that being a relatively new and inexperienced auditor, she is unsure as to what would be audited. Which of the following represents Karen's best response to this question?
A. Auditing revenue accounts is likely to involve testing the revenue accounts themselves as well as cash and receivables accounts, depending on the terms of the sales transaction.
B. Auditing revenue accounts for clients is relatively homogenous. Although there is a little variation from industry to industry, the audit procedures are generally the same.
C. When auditing revenue accounts, it is customary for the auditor to start with contra-revenue accounts such as sales discounts and allowances, and work backwards to the revenue accounts themselves.
D. Auditing revenues should always be a final step in the audit as a way to address any late billings that have been recorded.
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