The auditor of Ferguson’s, Inc., identified two internal controlsin the sales and collection cycle for testing. In the first control, the computer verifiesthat a planned sale on account will not exceed the customer’s credit limit entered inthe accounts receivable master file. In the second control, the accounts receivable clerkmatches bills of lading, sales invoices, and customer orders before recording in thesales journal. Describe how the presence of general controls over software programsand master file changes affects the extent of audit testing of each of these two internalcontrols.
The auditor of Ferguson’s, Inc., identified two internal controlsin the sales and collection cycle for testing. In the first control, the computer verifiesthat a planned sale on account will not exceed the customer’s credit limit entered inthe accounts receivable master file. In the second control, the accounts receivable clerkmatches bills of lading, sales invoices, and customer orders before recording in thesales journal. Describe how the presence of general controls over software programsand master file changes affects the extent of audit testing of each of these two internalcontrols.
Auditing: A Risk Based-Approach (MindTap Course List)
11th Edition
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Chapter9: Auditing The Revenue Cycle.
Section: Chapter Questions
Problem 28CYBK
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The auditor of Ferguson’s, Inc., identified two internal controls
in the sales and collection cycle for testing. In the first control, the computer verifies
that a planned sale on account will not exceed the customer’s credit limit entered in
the accounts receivable master file. In the second control, the accounts receivable clerk
matches bills of lading, sales invoices, and customer orders before recording in the
sales journal. Describe how the presence of general controls over software programs
and master file changes affects the extent of audit testing of each of these two internal
controls.
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