An auditor is planning a substantive test of details of the occurrence assertion for Sales Revenue transactions. The audit client’s performance obligations are satisfied when the product is shipped to the customer. Which of the following procedures is likely most effective for this test?

Question

BlackTom AI · Accepted Answer

When planning substantive tests of details for the occurrence assertion in Sales Revenue, we want evidence that revenue actually occurred and corresponds to shipments made to customers.
Option 1: Start with the shipping documents and verify to the sales journal entries. This approach directly ties the shipment event (evidence of performance obligation satisfaction) to recorded revenue in the sales journal, supporting that revenue occurred and was recorded for the correct period and shipment. It creates an appropriate linkage between source documents (shipping documents) and the recording of revenue.
Option 2: Start with recorded cash receipts entries and verify to the sales journal entries. While cash receipts can support that cash was received, they are not the最 direct evidence of the occurrence of revenue. Some sales may be recorded but later reversed or uncollected, and this path could miss shipments not yet collected or misstate the timing. Therefore this is less effective for occurrence.
Option 3: Start with recorded sales revenue entries and verify to the shipping documents. This path starts with the already recorded revenue and then checks against shipping documents, which is problematic for occurrence testing because it risks starting with potentially misstated revenue and then trying to corroborate it, rather than independently verifying that revenue corresponds to actual shipments.
Option 4: Start with recorded sales revenue entries and verify to the cash receipts journal entries. This linkage checks that revenue has a matching cash receipt, which addresses occurrence only insofar as cash collection is concerned, but it does not directly confirm that the revenue was supported by the actual shipment of goods. It also may miss situations where revenue was recognized without shipment or where shipments occurred but cash is uncollected.
In summary, option 1 provides the most direct and effective audit trail for the occurrence of revenue by aligning shipment evidence with the sales recording, while the other options rely on downstream or less direct evidence and introduce greater risk of undiscovered misstatements.

ACCT:4100:0001 Fall25 Exam 2- Requires Respondus LockDown Browser

An auditor is planning a substantive test of details of the occurrence assertion for Sales Revenue transactions. The audit client’s performance obligations are satisfied when the product is shipped to the customer. Which of the following procedures is likely most effective for this test?

View Explanation

Log in for full answers

Similar Questions

For the following procedure, identify the key assertion being tested. Select a sample of delivery dockets and agree the details to the details recorded in the sales journal.

Which of the following tests is a substantive test that provides evidence in respect of the occurrence assertion?

In a consumer society, many adults channel creativity into buying things

Economic stress and unpredictable times have resulted in a booming industry for self-help products

People born without creativity never can develop it

A product has a selling price of $20, a contribution margin ratio of 40% and fixed cost of $120,000. To make a profit of $30,000. The number of units that must be sold is: Type the number without $ and a comma. Eg: 20000

Which of the following statement regarding cost is correct:

Under the assumptions used in cost-volume-profit analysis, as the activity increases:

More Practical Tools for Students Powered by AI Study Helper

Homework AI Solver

Stylized AI Paper Writer

Plagiarism Checker Assistant

Citation AI Academic Writing Tool

In-Class Translation Assistant

AI Note Generator

AI Quiz Answers

Past Exam Questions from University Test Bank

Smart Practice Assistant

Adaptive Practice

Making Your Study Simpler