To verify that sales have been properly logged, the auditor ought to select a sample from the file of__________?
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Answer: C. sales invoices
Explanation
Sales invoices serve as primary legal and financial evidence that a sale transaction occurred. Tracing transactions from sales invoices verifies that billed amounts were properly recorded in ledgers. Sales invoices document the exact revenue figures that must be reflected in financial statements. Revenue recognition principles dictate that sales must be recorded when goods are delivered or services performed. Audit sampling involves selecting representative transactions to test the overall accuracy of accounting ledgers. Sales orders represent intent to buy rather than completed transactions ready for revenue logging.
Auditors test sales records to ensure companies do not inflate revenues by recording fictitious sales. Verifying sales invoices helps confirm that accounts receivable balances match legitimate customer billings. Accurate revenue reporting is critical for investors assessing a company's profitability and financial health. Purchase orders relate to buying goods from suppliers rather than recording customer sales revenue. Sales orders show customer requests but do not confirm that billing and delivery actually took place. Bills of lading track shipping logistics rather than serving as the definitive accounting record for billed sales.
- Subject
- Accounting and Finance
- Category
- Auditing
- Topic
- —
- Difficulty
- medium
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