Data Analytics For Accounting
19th Edition
ISBN: 9781260375190
Author: RICHARDSON, Vernon J., Teeter, Ryan, Terrell, Katie
Publisher: Mcgraw-hill Education,
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Chapter 6, Problem 6P
To determine
Identify the distributions which would be tested by using Benford’s law. Explain what will be shown by a Benford’s law evaluation of sales transaction amounts. Also, explain what would be shown by a test of vendor numbers or employee numbers. Identify the things which are different from a test of invoice or check numbers and the cases where Benford’s law cannot be applied.
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What is the difference between the auditor’s approach in verifyingsales returns and allowances and that for sales? Explain the reasons for the difference
Choose the one correct answer.
Which of the following Test of Controls is done to examine whether purchase orders, receiving reports and vouchers are prenumbered and accounted for? *Select samples from creditors list and send creditors’ confirmation.
Examine evidence of approval of unusual trade terms and discounts.
Trace samples of goods received notes to the related suppliers’ invoices and entries in the purchase journal and in creditors’ ledger.
Review bank statements for any unrecorded cheques payments.
Why then would Commodore's auditor require Rob to document any sales made using the book-and-hold technique?
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- Describe the FASB's rules or standard on revenue recognition. Where do we find the FASB's revenue recognition standard? Why is it important for an auditor that will audit sales to understand the revenue recognition standard?arrow_forwardhe auditor of Kent Ltd selects a sample from the file of shipping documents in order to confirm that all sales shipped are invoiced and recorded in accounting records. This test will confirm:Select one:a. Valuation and allocation assertion for sales.b. Cut-off assertion for sales.c. Occurrence assertion for sales.d. Completeness assertion for sales.arrow_forwardWhy would Commodore’s auditor insist that Rob document any sales booked under the book-and-hold technique?arrow_forward
- Which function should the billing department NOT perform? a. record the sales in the sales journal b. send the ledger copy of the sales order to accounts receivable c. send the stock release document and the shipping notice to the billing department as proof of shipment d. send the stock release document to inventory controlarrow_forwardWhich of the following audit procedures would an auditor most likely perform to test controls relating to management'ss assertion concerning the completeness of sales transactions? A. Verify the extensions and footings on the entity's sales invoice and monthly customer statements have been recomputed. B. Inspect the entity's reports of prenumbered shipping documents that have not been recorded in the sales journal. C. Compare the invoiced prices on the prenumbered sales invoices to the entity's authorized price list. D. inquire about the entity's credit granting policies and the consistent application of credit checks.arrow_forwardWhich of the following would not be a control in a sales system? a. Agreeing details from the sales order when preparing the goods to be dispatched to the customer b. Batch totals required when inputting sales invoices onto the system c. Approval of credit limits for new customers from a manager before being allowed credit d. The sales clerk alone deciding whether to give discounts or not to customers without approvalarrow_forward
- When performing tests of controls over cash sales, an auditor would use observation to test whether a retailer was using visible transaction totals at the point of sale Question 42 options: True Falsearrow_forwardCan a sales journal be used to record sales on account and a cash sale? Why or why not?arrow_forward
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