If the client's internal control for recording sales returns and allowances is evaluated as effective:
A) a sample of sales returns and allowances subsequent to closing date are examined.
B) all sales returns must be traced to supporting documentation.
C) a larger sample is needed to verify cutoff.
D) all sales returns must be confirmed with the customer.

Question

Quizplus · Accepted Answer

If the client's internal control for recording sales returns and allowances is evaluated as effective, a sample of sales returns and allowances subsequent to the closing date should be examined to ensure that the control is operating effectively. This will provide evidence that sales returns and allowances are being accurately recorded and appropriately reflected in the financial statements. The other options are not necessary or relevant to the evaluation of the internal control for sales returns and allowances.

If the Client's Internal Control for Recording Sales Returns and Allowances