The following sales procedures were encountered duringthe annual audit of Marvel Wholesale Distributing Company:Customer orders are received by the sales order department. A clerk computes theapproximate dollar amount of the order and sends it to the credit department for approval.Credit approval is stamped on the order and sent to the accounting department. A computer isthen used to generate two copies of a sales invoice. The order is filed in the customer order file.The customer copy of the sales invoice is held in a pending file awaiting notification thatthe order was shipped. The shipping copy of the sales invoice is routed through the warehouse, and the shipping department has authority for the respective departments to releaseand ship the merchandise. Shipping department personnel pack the order and manuallyprepare a three-copy bill of lading: The original copy is mailed to the customer, the secondcopy is sent with the shipment, and the other is filed in sequence in the bill of lading file.The sales invoice shipping copy is sent to the accounting department with any changesresulting from lack of available merchandise.A clerk in accounting matches the received sales invoice shipping copy with the salesinvoice customer copy from the pending file. Quantities on the two invoices are comparedand prices are compared to an approved price list. The customer copy is then mailed tothe customer, and the shipping copy is sent to the data processing department.The data processing clerk in accounting enters the sales invoice data into the computer,which is used to prepare the sales journal and update the accounts receivable master file.She files the shipping copy in the sales invoice file in numerical sequence.a. To determine whether the internal controls operated effectively to minimize instancesof failure to invoice a shipment, the auditor would select a sample of transactions fromthe population represented by the(1) customer order file. (3) customers’ accounts receivable master file.(2) bill of lading file. (4) sales invoice file.b. To gather audit evidence that uncollected items in customers’ accounts representedexisting trade receivables, the auditor would select a sample of items from the population represented by the(1) customer order file. (3) customers’ accounts receivable master file.(2) bill of lading file. (4) sales invoice file.c. To determine whether the internal controls operated effectively to minimize instancesof failure to post invoices to customers’ accounts receivable master file, the auditorwould select a sample of transactions from the population represented by the(1) customer order file. (3) customers’ accounts receivable master file.(2) bill of lading file. (4) sales invoice file.*
The following sales procedures were encountered during
the annual audit of Marvel Wholesale Distributing Company:
Customer orders are received by the sales order department. A clerk computes the
approximate dollar amount of the order and sends it to the credit department for approval.
Credit approval is stamped on the order and sent to the accounting department. A computer is
then used to generate two copies of a sales invoice. The order is filed in the customer order file.
The customer copy of the sales invoice is held in a pending file awaiting notification that
the order was shipped. The shipping copy of the sales invoice is routed through the warehouse, and the shipping department has authority for the respective departments to release
and ship the merchandise. Shipping department personnel pack the order and manually
prepare a three-copy bill of lading: The original copy is mailed to the customer, the second
copy is sent with the shipment, and the other is filed in sequence in the bill of lading file.
The sales invoice shipping copy is sent to the accounting department with any changes
resulting from lack of available merchandise.
A clerk in accounting matches the received sales invoice shipping copy with the sales
invoice customer copy from the pending file. Quantities on the two invoices are compared
and prices are compared to an approved price list. The customer copy is then mailed to
the customer, and the shipping copy is sent to the data processing department.
The data processing clerk in accounting enters the sales invoice data into the computer,
which is used to prepare the sales journal and update the accounts receivable master file.
She files the shipping copy in the sales invoice file in numerical sequence.
a. To determine whether the internal controls operated effectively to minimize instances
of failure to invoice a shipment, the auditor would select a sample of transactions from
the population represented by the
(1) customer order file. (3) customers’ accounts receivable master file.
(2) bill of lading file. (4) sales invoice file.
b. To gather audit evidence that uncollected items in customers’ accounts represented
existing trade receivables, the auditor would select a sample of items from the population represented by the
(1) customer order file. (3) customers’ accounts receivable master file.
(2) bill of lading file. (4) sales invoice file.
c. To determine whether the internal controls operated effectively to minimize instances
of failure to post invoices to customers’ accounts receivable master file, the auditor
would select a sample of transactions from the population represented by the
(1) customer order file. (3) customers’ accounts receivable master file.
(2) bill of lading file. (4) sales invoice file.*
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