Assertion and Related Control Activity - Revenue Transactions

Question 1

Occurrence - Sales recorded only with approved customer order and shipping document.

Answer 1

Test a sample of sales invoices for the presence of authorized customer order and shipping document.

Question 2

Occurrence - Accounting for numerical sequences of sales invoices.

Answer 2

Review and test client procedures for accounting for numerical sequence of sales invoices.

Question 3

Occurrence - Monthly customer statements; complaints handled independently.

Answer 3

Review and testing of client procedures for mailing and handling complaints about monthly statements.

Question 4

Completeness - Accounting for numerical sequences of shipping documents and sales invoices.

Answer 4

Review and test client’s procedures for accounting for numerical sequence of shipping documents and sales invoices.

Question 5

Completeness - Shipping documents matched to sales invoices.

Answer 5

Tracing of a sample of shipping documents to their respective sales invoices and to the sales journal.

Question 6

Completeness - Sales invoices reconciled to daily sales report.

Answer 6

Testing of a sample of daily reconciliations.

Question 7

Completeness - An open-order file that is maintained currently and reviews periodically.

Answer 7

Examination of the open-order file for unfilled orders.

Question 8

Authorization - Proper procedures for authorizing credit and shipment of goods.

Answer 8

Review of client’s procedures for granting credit. Examination of sales orders for evidence of proper credit approval.

Question 9

Authorization - Authorized price list and specified terms of trade.

Answer 9

Comparison of prices and terms on sales invoices to authorized price list and terms of trade.

Question 10

Accuracy - Authorized price list and specified terms of trade.

Answer 10

Comparison of prices and terms on sales invoices to authorized price list and terms of trade.

Question 11

Accuracy - Each sales invoice agreed to shipping document and customer order for product type and quantity; mathematical accuracy of sales invoice verified.

Answer 11

Examination of sales invoice for evidence that client personnel verified mathematical accuracy. Recompilation of the information on a sample of sales invoices.

Question 12

Accuracy - Sales invoices reconciles to daily sales report.

Answer 12

Examination of reconciliation of sales invoices to daily sales report.

Question 13

Accuracy - Daily posting to sales journal reconciled with posting to subsidiary ledger

Answer 13

Examination of reconciliation of entries to sales journal with entries to subsidiary ledger.

Question 14

Accuracy - Subsidiary ledger reconciled to general ledger control account

Answer 14

Review of reconciliation of subsidiary ledger to general ledger control account.

Question 15

Cutoff - All shipping documents forwarded to the billing function daily.

Answer 15

Comparison of the dates on sales invoices with the dates of the relevant shipping documents.

Question 16

Cutoff - Daily billing of goods shipped

Answer 16

Comparison of the dates on sales invoices with the dates they were recorded in the sales journal.

Question 17

Classification - Chart of accounts

Answer 17

Review of sales journal and general ledger for proper classification

Question 18

Classification - Proper codes for different types of products or services

Answer 18

Examination of sales invoices for proper classification.