The auditor is concerned that a client is failing to bill customers for shipments. An audit procedure that would gather relevant evidence would be to
A) select a sample of duplicate sales invoices and trace each to related shipping documents.
B) trace a sample of shipping documents to related duplicate sales invoices.
C) trace a sample of Sales Journal entries to the Accounts Receivable subsidiary ledger.
D) compare the total of the Schedule of Accounts Receivable with the balance of the Accounts Receivable account in the general ledger.

Question

Quizplus · Accepted Answer

By tracing a sample of shipping documents directly to related sales invoices, the auditor can confirm whether or not the client is billing customers for shipments. This procedure would provide the most direct and relevant evidence regarding the concern raised by the auditor. Option A involves tracing sales invoices to shipping documents, which would not necessarily provide evidence of unbilled shipments. Option C involves tracing Sales Journal entries to the Accounts Receivable ledger, which is not directly relevant to the concern regarding unbilled shipments. Option D involves comparing the balance of the Accounts Receivable account to the Schedule of Accounts Receivable, which would not necessarily reveal whether or not invoices have been properly issued for all shipments.

The Auditor Is Concerned That a Client Is Failing to Bill