Page 17 - eBook Audit Of Financial Statement Components

A selected sample of credits is also vouched to remittance

advices and sales adjustment authorizations to ensure the

completeness of accounts receivables and that the
reduction on account receivable is properly made and
Test Of Details of
Transactions: legitimate.

i. Vouching
• Sales cut-off test
ii. Sales cut-off
test The sales cut-off test is performed to ensure that current

iii. Cash receipt year sales and receivables are recorded in the current
cut-off test
period and the changes in current year sales and

receivables are reflected in the records of inventories and

cost of sales for the current year.

The sales return cut-off test is also performed to ensure

that sales returns are recorded in the appropriate period

and to avoid overstatement of sales and receivables.

The auditors should cautiously review and investigate an

unusually heavy volume of sales return immediately after

the year-end as it could signal those fictitious sales in the
current year-end were made to inflate recorded sales.

• Cash receipt cut-off test

The test is designed to provide evidence as to whether

cash receipts are recorded in an appropriate period. A

proper cut-off is important to ensure the correct
presentation of cash and receivables.

Selected cash receipts before the last number of the final
receipts for the current year will be inspected in terms of

date and traced to the receipt’s journals.

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