Niosoki Auto Parts sells new parts for foreign automobiles to auto dealers. Company policy requires that a prenumbered shipping document be issued for each sale. At the time of pickup or shipment, the shipping clerk writes the date on the shipping document. The last shipment made in the fiscal year ended August 31, 2016, was recorded on document 2167. Shipments are billed in the order that the billing clerk receives the shipping documents. Identify internal controls that will reduce the likelihood of cutoff misstatements. How would you test each control? Controls to test: A. Account for a sequence of cancelled checks. B. Examine several documents for prenumbering. C. Examine worksheets reconciling physical count and perpetual records. D. Observe dating of shipping documents and sales invoices, and timing of recording. E. Observe issuance of documents, examine document numbers, and inquiry. F. Reconcile recorded cash disbursements with cash disbursements on the bank statement for a test month. G. Trace entries in the acquisitions journal to related vendors' invoices, receiving reports, and purchase orders.
Niosoki Auto Parts sells new parts for foreign automobiles to auto dealers. Company policy requires that a prenumbered shipping document be issued for each sale. At the time of pickup or shipment, the shipping clerk writes the date on the shipping document. The last shipment made in the fiscal year ended August 31, 2016, was recorded on document 2167. Shipments are billed in the order that the billing clerk receives the shipping documents.
Identify internal controls that will reduce the likelihood of cutoff misstatements. How would you test each control?
Controls to test:
|
A. |
Account for a sequence of cancelled checks. |
|
B. |
Examine several documents for prenumbering. |
|
C. |
Examine worksheets reconciling physical count and perpetual records. |
|
D. |
Observe dating of shipping documents and sales invoices, and timing of recording. |
|
E. |
Observe issuance of documents, examine document numbers, and inquiry. |
|
F. |
Reconcile recorded cash disbursements with cash disbursements on the bank statement for a test month. |
|
G. |
Trace entries in the acquisitions journal to related vendors' invoices, receiving reports, and purchase orders. |
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