The client has the following control in place: Before sending out invoices to customers, the accounts receivable clerk will match details on customer's sales orders with the packing slip and shipping documents.

The auditor performs a test on this control and randomly selects from the sales for the year journal fifty invoices. The auditor traces the sales amounts from the sales journal to invoices, sales orders, packing slips, and shipping documents. There are two exceptions:

Exception 1- The shipping document and packing slip are missing for two sampled items but the sales order matches with the invoice. No further work is considered necessary.   

Exception 2.  For three other sampled items, the amount invoiced matches with the sales order but the packing slip shows in each of the 3 sampled items either 1 or 2 units ordered were not shipped. This discrepancy would have led to an overstatement of sales of a minor amount. No further work is considered necessary.

Required:

A) Evaluate the two exceptions and what additional procedures (if any) should the auditor perform as follow-ups

 

Exception 1 2 Evaluation- Is this an exception ? Indicate either "Yes" or "No" (1 mark each) Follow-up procedure (1 mark each) B)Assume that the auditor cannot satisfy themselves with the follow up procedures suggested above, what conclusion will the auditor make respect to the controls and what audit approach would they take for auditing sales and accounts receivable. Provide a rationale for your approach