Exam 12: Audit of the sales and collection cycle: Tests of controls and substantive tests of transactions

An effective procedure to test the completeness objective for sales is to trace sales journal entries to copies of sales orders, shipping documents, and sales invoices.

A bill of lading is a written contract of the receipt and shipment of goods.

Which of the following is a listing of the amount owed by each customer that shows how long each component part has been due?

One of the key internal controls to prevent invalid (fictitious)transactions in the sales and collection cycle is to:

Which of the following documents is used to permit the immediate deposit of cash and to improve the control over the custody of assets?

Which of the following is NOT one of the five classes of transactions in the sales and collection cycle?

Which of the following documents is mainly related to cash receipts?

The granting of credit is critical because it is the first point in the cycle at which company assets are given up.

Match five of the 11 terms for documents and records (a-k)with the five descriptions provided below (1-5): a. customer order form b. sales order c. bill of lading d. sales invoice e. summary sales report f. accounts receivable master file g. monthly statement h. remittance advice i. prelisting of cash receipts j. credit note k. uncollectible account authorisation form. 1. a schedule prepared by an independent person when cash is received - used to verify whether cash received was recorded and deposited at the correct amounts and on a timely basis 2. a document indicating a reduction in the amount due from a customer because of returned goods or an allowance granted 3. a document prepared to initiate shipment of goods, indicating the description of the merchandise, the quantity shipped, and other relevant data - a written contract between the carrier and seller of the receipt and shipment of goods 4. an internal document for communicating the description, quantity, and related information for goods ordered by a customer - frequently used to indicate credit approval and authorisation for shipment 5. a document that accompanies the sales invoice mailed to the customer, which can be returned to the seller with the cash payment

Including cash sales, every transaction and amount is ultimately included in one of two balance sheet accounts.

The listing or report generated from sales which includes the customer name, date, sales, and GST amount, and whether the sale was for cash or accounts receivable, for all sales in a period is the:

The classes of transactions in the sales and collection cycle are sales, cash receipts, sales returns and allowances, and writing off uncollectible accounts.

When designing audit procedures, the direction of tests is a crucial step in satisfying the:

A proof of cash receipts is generally performed on all audits.

The most difficult type of cash theft for the auditor to detect is that which occurs:

The auditor's assessment of control risk is a critical one because it affects the auditor's decisions about:

State the six specific transaction-related audit objectives for sales, and describe one common substantive test of transactions for each objective.

To test for recorded sales for which there were no actual shipments, the auditor traces from the:

Which one of the following is NOT typically included in the sales and collection cycle?

The business functions mainly related to the sales account include: