Problem
Nancy is an auditor working on the audit engagement for Dave Inc. a large electronics retailer with many customers. A sales order is generated once a customer order is received. When the delivery team recives goods based on the sales order from the distribution, the driver signs a trainsit receipt showing the quantities and items shipped and customer info. The transit receipts are filed by date. A copy is sent to the accounting office, where it is matched to the sales order and used to record the reduction in inventory and to issue a sales invoice. The invoice number is noted on the transit receipt and file.
Required:
Should these controls be categorized as key controls? why or why not?
What is the benefits of testing these controls?
Describe a way to select a sample and test these controls
What is the implication if the controls are effective 95% of the time? what is the implication if the controls are effective 64% of the time?