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Exam AUD topic 1 question 838 discussion

Actual exam question from AICPA's AUD
Question #: 838
Topic #: 1
[All AUD Questions]

An auditor most likely would review an entity's periodic accounting for the numerical sequence of shipping documents and invoices to support management's financial statement assertion of:

  • A. Occurrence.
  • B. Classification.
  • C. Cutoff.
  • D. Completeness.
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Suggested Answer: D 🗳️
Choice "D" is correct. An entity's periodic accounting for the numerical sequence of shipping documents and invoices supports management's financial statement assertion of completeness of sales. A gap in recorded sequence numbers might indicate an unrecorded sale.
Choice "A" is incorrect. An auditor would trace from the sales invoices or sales journal (accounting records) to the shipping documents (source document) to support management's assertion of occurrence.
Choice "B" is incorrect. An auditor would examine journal entries for a sample of shipping documents to determine whether the client has recorded the sales in the proper accounts.
Choice "C" is incorrect. An auditor would review supporting documentation for shipping documents just before and just after year-end to determine whether appropriate cutoff has been achieved.

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