What evidence source would you use to select a sample of sales transactions to test the occurrence of sales transactions at one store? Why would you use this source? What evidence would you examine for each transaction selected?

Question

What will be an ideal response?

Answer 1

When testing the occurrence assertion for sales transactions, the auditor is trying to determine that
recorded sales transactions represent valid exchanges of goods or services with customers who have
provided cash or a promise to pay cash in the future. To effectively accomplish that objective, the
direction of the auditor’s testing is from accounting records to source documents.
To audit the occurrence assertion for Henrico’s sales transactions, the auditor is likely to select
sample transactions from store Daily Sales Reports. The Daily Sales Report is the accounting record
that summarizes total sales, both cash, debit, and credit card sales, for each store by day. Starting
with that accounting record, the auditor would then vouch cash, debit, and credit card sales to the
email bank deposit confirmation, which would serve as the source document supporting recorded
sales. Note, at some point the auditor must verify that amounts listed on the Daily Sales Report are
ultimately included in the consolidated sales account in the General Ledger. Most auditors view that as
part of their test of the accuracy assertion, which is discussed in the solution to question 5.