[SchruteBeet]

Which of the following procedures would an auditor most likely perform to test controls relating to management’s assertion about the completeness of cash receipts for cash sales at a retail outlet?

A. Inquire about employee’s access to recorded but undeposited cash
B. Compare cash balance in the GL with the bank confirmation request
C. Trace the deposits in the cash receipts journal to the cash balance in the GL
D. Observe consistency of the employee’s use of cash registers and tapes

Why is “D” the correct answer? If you are testing the completeness assertion, wouldn’t you trace the deposits from the cash receipts journal to the cash balance in the GL (option C)? The explanation says that this will not provide evidence regarding unrecorded liabilities.

[Missy]

The cash receipt journal is only complete if employees are consistently using the register and tapes (ie if they're taking cash and not using the register to record the transactions, the cash receipts journal is useless). It's testing controls.

Licensed Massachusetts Non Reporting CPA since 2012
Finance/Admin/HR Manager

[fragchild]

Remember the question asks what ‘test of controls' will most likely be performed.

A) Inquiring about internal controls is not testing controls
B) This is a test of detail (i.e. substantive procedures)
C) This is a test of detail (i.e. substantive procedures)
D) This is testing controls by observing that controls are operating effectively

[Author]

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