[goodluck2everyone]

I understand that going from accounting records to source documents proves existence (vouching) and going from source documents to accounting records proves completeness (tracing) but then I get questions like this:

If the objective of an auditor’s test of details is to detect a possible understatement of sales, the auditor most likely would trace transactions from the

A. Sales invoices to the shipping documents.

B. Cash receipts journal to the sales journal.

C. Shipping documents to the sales invoices.

D. Sales journal to the cash receipts journal.

Key word here is TRACE. If we are tracing, we’re looking for completeness and thus, understatement. We’d start from the bottom and go up on the list. What comes first, the invoice or the shipping document? Why is the answer C?

BEC- 80
REG- 68, 71, July
AUD- 61 , 84
FAR- -- 75 🙂

[KasiaS]

The answer is c because shipping docs come before invoicing. Always keep track of the order od the deptak. For sales it goes: sales order, credit auth, inventory control, shipping, invoicing, A/R, general acctg, and treasurer. First you have to ship before creating an invoice and recognizing the revenue so that is why a is wrong. B and d are wrong because if you're testing for understatement of the sales journal, you shouldn't trace anything to or from that journal specifically. I hope this helps.

FAR 88 (07/15/11)
BEC 83 (08/31/11)
AUD 81 (10/15/11)
REG 83 (11/26/11)

Used NIU Correspondence CPA Review

[misanthrope87]

Just because an invoice was created doesn't show that the order was completed by shipping it out. So therefore, the shipping documents is a stronger source document than an invoice, and comes after the invoice.

B 2/12 87
A 11/11 90
R 8/11 86
F 5/12 88

[jenuno01]

I also had the sam problem with this question last week… it is very important to memorize the order of the documents in the cycles because tracing and vouching can begin at any point in the process (not always from source doc to GL and GL to source doc)

Class of 2012

[goodluck2everyone]

thanks everyone

BEC- 80
REG- 68, 71, July
AUD- 61 , 84
FAR- -- 75 🙂

[jelly]

Watch out for the word “trace,” as it's being used in a different context in this question, to mean “research.”

Couldn't pass again!

[See Pee A]

I was confused about this until I understood it. Now it's simple. When you're looking for understatement you “trace” (may use a diff word) from the source documents to a ledger-type thing. For overstatement, you “vouch” (again, may use diff word) from the ledger-type thing to the source document.

In this case, since you're looking for understatement, you always start with the source document. For revenue, it has to occur. The document that tells us a revenue event has occurred is a shipping document (even if we forgot to account for it–understatement by not billing an invoice). Go through a few of these and don't over think the questions, they are simpler than they become in your mind.

BEC 86 (08/30/11)
FAR 84 (10/13/11)
REG 88 (11/08/11)
AUD 86 (11/29/11)

Exam prep - Becker self-study

[Author]

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