Question

An auditor most likely would limit substantive audit tests of sales transactions when the risks of material misstatement are assessed as low for the existence and occurrence assertions concerning sales transactions and the auditor has already gathered evidence supporting

Shipping and receiving activities.

Cash receipts and accounts receivable.

Opening and closing inventory balances.

Cutoffs of sales and purchases.

Answer 1

An auditor most likely would limit substantive audit tests of sales transactions when the risks of material misstatement are assessed as low for the existence and occurrence assertions concerning sales transactions and the auditor has already gathered evidence supporting:

Cash Receipts and Accounts Receivable

A thorough evaluation of the Cash receipts and Accounts receivables provides the auditor with the assurance that sales transactions are complete and there is no material misstatement due to error or irregularity. Errors are unintentional mistakes including clerical mistakes, mistakes in the application of accounting principles, and misinterpretation of facts. Irregularities result from intentional distortions such as fraud or defalcations.