An auditor wishes to test the completeness assertion for sales. Which of the following audit tests...
An auditor wishes to test the completeness assertion for sales. Which of the following audit tests would most likely accomplish this objective?
1.
Select a sample of shipments occurring during the year and trace each one to inclusion in the sales journal.
2.
Select large individual sales recorded during the year and review supporting documentation.
3.
Compare accounts receivable turnover (net credit sales/average gross receivables) in the current year to that achieved in the prior year.
4.
Use common size analysis to compare recorded sales to sales recorded by other companies in the same industry.
Homework Answers
The correct option is
1.Select a sample of shipments occurring during the year and trace each one to inclusion in the sales journal.
Explanation
Completeness assertion means financial statements are thoroughly prepared and it includes each and every item to be included in statement for given accounting period.
Shipping document is document prepared and it includes quantity and description of goods ordered. The shipping document creates trail for invoice preparation. This assures that all shipments are made, recorded and billed. Later on, this is recorded as sales generated. Hence, it fulfils the completeness assertion by cross verification of accuracy in quantities shipped.
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