For the audit of Carbald Supply Company, Farda is conducting a test of sales for the first nine months of the fiscal year ended December 31, 2012.

2. For the audit of Carbald Supply Company, Farda is conducting a test of sales for the first nine months of the fiscal year ended December 31, 2012. Incorrect revenue recognition has been assessed as a significant risk. Materiality is set at $750,000.

Included in the audit procedures are the following:

1. Foot and cross-foot the sales journal and trace the balance to the general ledger.

2. Review all sales transactions for reasonableness.

3. Select a sample of recorded sales from the sales journal and trace the customer name and amounts to duplicate sales invoices and the related shipping document.

4. Select a sample of shipping document numbers and perform the following tests:

4.1 Trace the shipping document to the related duplicate sales invoice.

4.2 Examine the duplicate sales invoice to determine whether copies of the shipping document, shipping order, and customer order are attached.

4.3 Examine the shipping order for an authorized credit approval.

4.4 Examine the duplicate sales invoice for an indication of internal verification of quantity, price, extensions, and footings; trace the balance to the accounts receivable master file.

4.5 Compare the price on the duplicate sales invoice with the sales price in the product master file and the quantity with the shipping document.

4.6 Trace the total on the duplicate sales invoice to the sales journal and the accounts receivable master file for customer, name, amount, and date.

REQUIRED

a.State the audit objective associated with each of the audit procedures.

b. Identify those audit procedures, which are potential controls with respect to revenue recognition. Justify your response.

c. Identify those audit procedures where computer-assisted audit tests (CAATs) can be used for all or part of the audit procedure. State the process that the CAATs can complete.

d. What type of sampling would you use for these audit procedures? Justify your response.

e. State the appropriate sampling unit, define the attribute that you would test, and define exception conditions for each of the audit procedures.

f. Which of the audit procedures are dual-purpose tests? Justify your response.