Pretend the mafia needs somewhere to launder the “dirty” money into the legal system. They can set up a storefront and report “sales” of merchandise to get the money from the drug deals into the system as legal, “clean” money. If you as their auditor agree with sales of $1m when they really only sold $2k of product, that'd be a problem. They might be smart enough to only put in A/R real accounts, but still have fake sales.
Crazy example, but trying to show how A/R confirmations might not confirm sales.
As for how to confirm them, I'll leave that to someone who knows. 🙂 I have a vague memory of it being something like checking to see of product bought during the year supports the product sold levels. For example: Beg Inv 10, End Inv 15, Purchases 30; it'd be consistent to have sold 23 or 25 of the product (23 would be if you had 2 lost due to damage/theft/etc., 25 would be all), but sales of 200 would indicate a problem. Also vouching or tracing but I always get those terms confused. However, I don't do auditing, and the work I do in accounting wouldn't be able to confirm sales in the normal way (work at a college, so confirming sale of a semester of courses would be quite a bit different!), so this is just a vague memory in the back of my head and not to be trusted too much…
P. S. Found this Googling which gives a generic idea:
Transactional Testing
An auditor determines if the financial statement amounts of sales and accounts receivable are correct by verifying individual transactions. Accounts receivable balances are tested by sending confirmation letters to customers to obtain objective assurance that the balance is correct. The auditor also chooses sales transactions from the sales ledger and verifies that there are legitimate sales receipts to back up the transaction. To test the accuracy of the sales figure, the auditor reviews sales transactions in the ledger close to the financial statement date to ensure that the company only included sales prior to that date.
https://smallbusiness.chron.com/audit-procedures-sales-collection-cycle-49846.html
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