Fact Pattern: Sales procedures that were encountered during the regular annual audit of Marvel Wholesale Distributing Company are described below. Customer orders are received by the sales-order department. A clerk computes the dollar amount of the order and sends it to the credit department for approval. Credit approval is stamped on the order and returned to the sales-order department. An invoice is prepared in two copies, and the order is filed in the customer order file. The customer copy of the invoice is sent to the billing department and held in the pending file, awaiting notification that the order has been shipped. The shipping copy of the invoice is routed through the warehouse, and the shipping department has authority for the respective departments to release and ship the merchandise. Shipping department personnel pack the order and prepare a three-copy bill of lading: The original copy is mailed to the customer, the second copy is sent with the shipment, and the other is filed in sequence in the bill of lading file. The invoice shipping copy is sent to the billing department. The billing clerk matches the received shipping copy with the customer copy from the pending file. Both copies of the invoice are priced, extended, and footed. The customer copy is then mailed directly to the customer, and the shipping copy is sent to the accounts receivable clerk. The accounts receivable clerk enters the invoice data in a sales-accounts receivable journal, posts the customer’s account in the subsidiary customers’ accounts ledger, and files the shipping copy in the sales invoice file. The invoices are numbered and filed in sequence.
To determine whether Marvel Company’s internal control operated effectively to minimize errors of failure to post invoices to the customers’ accounts ledger, the auditor should select a sample of transactions from the population represented by the
A.Customer order file.
B.Bill of lading file.
C.Sales invoice file.
D.Subsidiary customers’ accounts ledger.
C.Sales invoice file.
The auditor should trace sales according to the sales invoices to the accounts receivable subsidiary ledger. Sales invoices in the sales invoice file without corresponding entries in the subsidiary ledger represent transactions not posted.
(this multiple choice question has been scrambled)