Which of the following audit procedures will best uncover an understatement of sales and accounts receivables?
A. Test a sample of sales tranactions, selecting the sample from prenumbered shipping documents B. Test a sample of sales tranactions, selecting the sample from sales invoices recorded in the sales journal C. Confirm accounts receivable D. Review the aged receivable trial balance
Correct answer is option A
All the audit procedures listed above are methods to audit sales and accounts receivables, but the best method to uncover an understatement of sales and accounts receivables is to test a sample of sales transaction, selecting the sample from pre numbered shipping documents.
The auditor would select a sample of shipping documents and trace them into the sales journal to obtain evidence on whether all shipments have been recorded as sales transaction. With the use of audit software, the auditor can look for gaps in the recorded sales invoice numbers and verify that the missing numbers are appropriate and do not represent unrecorded sales.