A risk of material misstatement in accounts receivable associated with the accuracy balance-related audit objective is that "sales recorded at the incorrect price result in revenue and accounts receivable that are over- or understated." Which of the following tests of detail of balances would respond to this risk?
A)Select a sample of master file change forms and verify that all sales prices changes were appropriately authorized.
B)Use audit software to match sales invoice price details to authorized prices in the sales price master files.
C)Enquire with management with respect to the procedures used to update the sales price master file.
D)Match shipping details for a sample of invoices to the invoice details on an item by item basis.

Question

Quizplus · Accepted Answer

Test B is the best choice because it directly addresses the risk of sales being recorded at the incorrect price by comparing invoice price details to authorized prices in the sales price master files. Test A only verifies authorization, which is not the same as ensuring accuracy of the sales price. Test C inquires about procedures used, but does not provide direct evidence of accuracy. Test D matches shipping details, which does not necessarily provide evidence of whether sales were recorded at the correct price.

A Risk of Material Misstatement in Accounts Receivable Associated with the Accuracy