Lenter Supply Company is a medium-sized distributor of wholesale hardware supplies in the central Ohio area. It has been a client of yours for several years and has instituted excellent internal controls for sales at your recommendation. In providing control over shipments, the client has prenumbered “warehouse removal slips” that are used for every sale. It is company policy never to remove goods from the warehouse without an authorized warehouse removal slip. After shipment, two copies of the warehouse removal slip are sent to billing for the computerized preparation of a sales invoice. One copy is stapled to the duplicate copy of a prenumbered sales invoice, and the other copy is filed numerically. In some cases, more than one warehouse removal slip is used for billing one sales invoice. The smallest warehouse removal slip number for the year is 11741 and the largest is 34687. The smallest sales invoice number is 45302 and the largest is 65747. In the audit of sales, one of the major concerns is the effectiveness of the controls in ensuring that all shipments are billed. You have decided to use audit sampling in testing internal controls. Your supervisor suggests the possibility of performing other sales tests with the same sample as a means of efficiently using your audit time. List two other audit procedures that can conveniently be performed using the same sample and state the purpose of each of the procedures. Is it desirable to test the occurrence of sales with the random sample you have designed in part c.? Why or why not?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Lenter Supply Company is a medium-sized distributor of wholesale hardware supplies in the central Ohio area. It has been a client of yours for several years and has instituted excellent internal controls for sales at your recommendation.

In providing control over shipments, the client has prenumbered “warehouse removal slips” that are used for every sale. It is company policy never to remove goods from the warehouse without an authorized warehouse removal slip. After shipment, two copies of the warehouse removal slip are sent to billing for the computerized preparation of a sales invoice. One copy is stapled to the duplicate copy of a prenumbered sales invoice, and the other copy is filed numerically. In some cases, more than one warehouse removal slip is used for billing one sales invoice. The smallest warehouse removal slip number for the year is 11741 and the largest is 34687. The smallest sales invoice number is 45302 and the largest is 65747.

In the audit of sales, one of the major concerns is the effectiveness of the controls in ensuring that all shipments are billed. You have decided to use audit sampling in testing internal controls.

Your supervisor suggests the possibility of performing other sales tests with the same sample as a means of efficiently using your audit time. List two other audit procedures that can conveniently be performed using the same sample and state the purpose of each of the procedures.
Is it desirable to test the occurrence of sales with the random sample you have designed in part c.? Why or why not?

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