Evaluating Evidence in Auditing
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One of the important aspects when evaluating evidence in auditing is the timing of the evidence. That is does the evidence indicate that the transactions were recorded in the proper period? This test work is often called cut off testing.
In looking at this type of testing it is also important for the auditor to understand the documentary evidence that surrounds this transaction. For example if we look at sales or purchases of products at a manufacturing company one of the important aspects is looking at the terms and conditions (T&C) in which the company operates with its customers and vendors.
This is critical for the auditor as it will tell him/her when title passes. These are commonly referred to as Inco terms (International Trade Terms). These terms and conditions will specify when title passes from buyer to seller.
Therefore, let's look at a simple sales transaction where the Inco terms are FOB shipping point. In this case the auditor would look at the Purchase Order with the customer, the invoice and the shipping document. From a cut off standpoint (due to the T&C) the auditor will determine when the product was shipped and then ensure that the sale is recorded in the proper period.
Why would this be important? Can you think of a reason that the auditor would perform these types of tests? What about for purchases?
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Solution Summary
One of the important aspects when evaluating evidence in auditing is the timing of the evidence. That is does the evidence indicate that the transactions were recorded in the proper period? This test work is often called cut off testing.
In looking at this type of testing it is also important for the auditor to understand the documentary evidence that surrounds this transaction. For example if we look at sales or purchases of products at a manufacturing company one of the important aspects is looking at the terms and conditions (T&C) in which the company operates with its customers and vendors.
This is critical for the auditor as it will tell him/her when title passes. These are commonly referred to as Inco terms (International Trade Terms). These terms and conditions will specify when title passes from buyer to seller.
Therefore, let's look at a simple sales transaction where the Inco terms are FOB shipping point. In this case the auditor would look at the Purchase Order with the customer, the invoice and the shipping document. From a cut off standpoint (due to the T&C) the auditor will determine when the product was shipped and then ensure that the sale is recorded in the proper period.
Why would this be important? Can you think of a reason that the auditor would perform these types of tests? What about for purchases?
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One of the important aspects when evaluating evidence in auditing is the timing of the evidence. That is does the evidence indicate that the transactions were recorded in the proper period? This test work is often called cut off testing.
In looking at this type of testing it is also important for the auditor to understand the documentary evidence that surrounds this transaction. For example if we look at sales or purchases of products at a manufacturing company one of the important aspects is looking at the terms and conditions (T&C) in which the company operates with its customers and vendors.
This is critical for the auditor as it will tell him/her when title passes. These are commonly referred to as Inco terms (International Trade Terms). These terms and conditions will specify when title passes from buyer to seller.
Therefore, let's ...
Purchase this Solution
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