Reference no: EM132586348

An auditor noted that client sales increased 10 percent for the year. At the same time, Cost of Goods Sold as a percentage of sales had decreased from 45 percent to 40 percent and year-end accounts receivable had increased by 8 percent. Based on this information, the auditor interviewed the sales manager, who stated that the increase in sales without a corresponding increase in cost of goods sold was due to a price increase enacted by the company during the year.

Question 1: How would the auditor test the sales manager's representation?

1. Perform additional inquiries with sales personnel.
2. Vouch vender invoices to payments made after year-end.
3. Send confirmations asking customers about unit prices paid for product.
4. Obtain copies of all price lists in use during the year and vouch the prices to sales invoices.