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CS Professional · Internal and Forensic Audit · Internal Audit of Specific Functions

An internal auditor at Bharat Textiles Pvt Ltd wants to test whether recorded sales are genuine (existence of revenue). Which procedure is most appropriate?

The best procedure is to select recorded sales invoices and vouch them to dispatch documents, proof of delivery and customer receipts. This confirms that the sales actually occurred. Starting from dispatch notes instead would test completeness, not existence of recorded revenue.

  1. ATrace a sample of sales invoices to dispatch documents, proof of delivery and customer receiptsCorrect
  2. BTrace a sample of goods dispatch notes to the sales register to check completeness only
  3. CRecompute the annual advertising budget variance
  4. DCompare the sales price list with competitors' price lists

Explanation

To test that recorded sales are real, the auditor starts from the recorded invoices and vouches back to supporting evidence such as dispatch records, delivery proof and cash receipts. Tracing dispatch notes to the register tests completeness, which is the opposite direction and a different assertion.

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