Problem 7: Auditing Sales/Revenue Transactions When an auditor needs to obtain an understanding of the overall internal control of a company, the auditor              first needs to consider the elements of the control environment. To assist the auditor in assessing the level of  control risk, the following tests of controls were designed to allow the auditor to determine if the company’s related controls were operating effectively in the revenue cycle.                                                      Determine which of the four management assertion(s) apply to each individual sales (revenue) control  being discussed. Hint: many have more than one assertion.                                                      Management Assertions:  Existence & Occurrence, Rights, Completeness, Valuation                                                                                           1. The company segregates the duties for authorizing, approving customer credit, shipping merchandise,                 and accounting for all sales transactions. They have different employees for each duty noted.                     Which management assertions apply to this control?                                                                                                                                            2. Every month, the accounting manager reconciles the accounts receivable master file to the general ledger.            Which management assertions apply to this control?                                                                                                                                            3. The computer is programmed to verify the customer order clerk's assigned password                     before any sales data can be inputted.                                         Which management assertions apply to this control?

Problem 7: Auditing Sales/Revenue Transactions
When an auditor needs to obtain an understanding of the overall internal control of a company, the auditor             
first needs to consider the elements of the control environment. To assist the auditor in assessing the level of
 control risk, the following tests of controls were designed to allow the auditor to determine if the company’s
related controls were operating effectively in the revenue cycle.        
                                            
Determine which of the four management assertion(s) apply to each individual sales (revenue) control 
being discussed. Hint: many have more than one assertion.
                                                    

Management Assertions:  Existence & Occurrence, Rights, Completeness, Valuation                                     
                                                    
1. The company segregates the duties for authorizing, approving customer credit, shipping merchandise,                
and accounting for all sales transactions. They have different employees for each duty noted.                    
Which management assertions apply to this control?                                 
                                                    
                                                    
2. Every month, the accounting manager reconciles the accounts receivable master file to the general ledger.            Which management assertions apply to this control?                                 
                                                    
                                                    
3. The computer is programmed to verify the customer order clerk's assigned password                    
before any sales data can be inputted.                                        
Which management assertions apply to this control?                                 
                                                    
                                                    
4. Years ago, the company purchased a software package that was used by other companies                    
 in the same industry (it was not a specially made software). It was sold by a leading                    
software company known for their highly rated products.                                
Which management assertions apply to this control?                                 
                                                    
                                                    
5. The computer assigns a number to every sales invoice.                                
Which management assertions apply to this control?                                 
                                                    
                                                    
6. Input validation checks (application controls) are applied to every bill                             
to ensure the accuracy of the billiling process.                                    
Which management assertions apply to this control?                                 
                                                    
                                                    
7. The accounts receivable employee matches every invoice                                
with the delivery receipts and accounts for them in numerical                                 
sequence.                                                
Which management assertions apply to this control?                                 
                                                    
                                                    
8. Monthly statements are mailed to customers.                                    
Which management assertions apply to this control?                                 
                                                    
                                                    
9. The computer assigns a number to every delivery receipt.                                
Which management assertions apply to this control?                                 
                                                    
                                                    
10. All sales returns are approved by the vice president of sales.                            
Which management assertions apply to this control?