Which of the following procedures would an auditor most likely rely on to verify management's assertion of completeness?Select one:a.Compare a sample of shipping documents to related sales invoices.b.Confirm a sample of recorded receivables by direct communication with the debtors.c.Review standard bank confirmations for indications of kiting.d.Observe the client's distribution of payroll checks.
Question
Which of the following procedures would an auditor most likely rely on to verify management's assertion of completeness?Select one:a.Compare a sample of shipping documents to related sales invoices.b.Confirm a sample of recorded receivables by direct communication with the debtors.c.Review standard bank confirmations for indications of kiting.d.Observe the client's distribution of payroll checks.
Solution
The auditor would most likely rely on the procedure of comparing a sample of shipping documents to related sales invoices to verify management's assertion of completeness. This is because this procedure ensures that all goods that have been shipped have been invoiced, hence, ensuring completeness of the revenue recorded from sales.
Here's a step-by-step breakdown:
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The auditor selects a sample of shipping documents. These documents provide evidence that goods have been shipped to customers.
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The auditor then compares these shipping documents to the related sales invoices. Sales invoices are the bills sent to customers once the goods have been shipped.
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If all shipping documents can be matched with corresponding sales invoices, it provides assurance that all shipments have been invoiced. This supports the management's assertion of completeness, which states that all transactions that should have been recorded have been recorded.
The other options (b, c, and d) are not as directly related to the assertion of completeness. They involve confirming recorded receivables (which is more about existence and rights and obligations), reviewing for indications of kiting (which is more about accuracy and classification), and observing the distribution of payroll checks (which is more about occurrence and understandability).
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