Auditing and Attestation- Certified Public Accountant (CPA) Practice Exam -

For which transaction type would an auditor seek evidence to confirm sales completeness?

1. Sales returns

2. Sales discounts

3. Sales transactions to cash receipts

4. Sales to related parties

The correct answer is: Sales transactions to cash receipts

To confirm sales completeness, an auditor focuses on the relationship between sales transactions and cash receipts. The key concern is ensuring that all sales recorded in the accounting records are reflected in the cash that has been collected. If there are discrepancies between the total sales recorded and the cash receipts, it could indicate issues such as unrecorded sales, recording errors, or potential fraud. Tracking sales transactions to cash receipts involves verifying that each sale results in cash collection, ensuring that nothing is omitted and that sales are accurately reported. This is crucial because the completeness assertion is about ensuring that all transactions that should be recorded have indeed been recorded. In contrast, sales returns relate to the reversal of previously made sales and would not directly confirm the initial completeness of sales. Sales discounts may affect the recorded revenue but don’t directly provide evidence on whether all sales transactions were recorded. Sales to related parties also highlight the nature of the transaction but do not inherently provide insights necessary for confirming the completeness of all sales transactions. Thus, linking sales transactions with cash receipts is the most effective approach for an auditor to confirm completeness.