Which of the following would be the best audit procedure to use to determine if a division's unusually high sales and gross margin for November and December were the result of fraudulently recorded sales?
Which of the following would be the best audit procedure to use to determine if a division's unusually high sales and gross margin for November and December were the result of fraudulently recorded sales?
To determine if the unusual sales and gross margin are the results of fraudulently recorded sales, tracing a sample of shipping documents to related sales invoices is the most direct and effective audit procedure. This method checks if the sales recorded actually correspond to real shipments and valid customer orders. Confirming accounts receivable balances with customers could indicate if customers acknowledge the invoices, but it doesn't necessarily prove the authenticity of the sales or catch false entries. Comparing sales and gross margin totals or using regression analysis may highlight anomalies but won't directly verify the authenticity of individual sales transactions.
The question is how to determine the recorded sales are genuine. Best answer is to confirm with customers.
WHY NOT C ??!