Reference no: EM131827504

DIRECTIONAL TESTING AND DUAL-PURPOSE TESTS

During a discussion, one auditor noted that her approach to testing sales transactions was to select a random sample of recorded sales and trace back through the system to supporting documents, noting that all items billed were shipped and were invoiced at correct prices. She stated that she then had good confidence about the correctness of the sales account and, thus, having performed a dual-purpose test, the remaining work on sales (assuming the procedures also evidenced the working of control procedures) could be limited.

A second auditor disagreed. Her approach was to select evidence of shipments, such as prenumbered shipping documents, and then trace forward through the system to the actual invoice processing. If no exceptions were noted, however, she agreed with the first auditor that the remaining audit work on the sales account could be limited.

REQUIRED:

a- Which auditor is right? Explain

b- What assertion is tested by the second auditor?

c- What is a dual purpose test? Explain why the tests performed by both of the auditors would or would not be considered dual purpose tests.