[etg1991]

I got this in one of those annoying sims about transaction cycles (sales in this case) and I had to say what the auditor would do in order to detect or prevent the error or fraud:

Goods ordered by customers are shipped, but are not billed to anyone.

This is the answer: Shipping documents are compared with sales invoices when goods are shipped. Detection and prevention of unbilled shipments would occur when shipping documents are compared with sales invoices at the time of shipment. This would also be most timely as it would catch billing failures before the goods go out.

I did not think this was the answer because it is telling me that shipping documents and sales invoices are being compared when goods are shipped, and I automatically discarded comparing anything to sales invoices because I’m being told we are literally not billing anything to customers. Can someone please help me understand? I would appreciate the help big time! Thanks!

AUD - 75
BEC - NINJA in Training
FAR - 75
REG - 84

Success is not final, failure is not fatal: it is the courage to continue what counts - Winston Churchill

[Sal]

I'm guessing its more to do with I/C you don't want customers stealing from wearhouse and shipping away good that are not invoiced or send goods to wrong customer or more than they should. So you would compare shipping documents to invoices.
Extra info:
Checking terms such as FOB shipping point vs FOB destination would help with recognizing sales in proper period. Overstatement/understatement of sales etc. Look at the bigger picture. Not sure if I helped but that's what I think best of luck with studying.

- SAL

[Silent]

My advice is to look at it from logical point of view. You sent a product but have not billed customer yet, how do you detect an error/fraud. You know you have shipping information being it been shipped and there have to be invoice information even if you are giving the product away for free. I agree with dailyplannerac that this appears to be internal control type of question.

[Island Mango]

I agree with the above posters. This is an I/C issue. You could approach understanding this by asking the question why does comparing sales invoice with shipping documents detect error and/or prevent fraud? By comparing these two documents you are ascertaining that the amount and quantity of goods sold (sales invoice) are the same as goods shipped (shipping docs). If they don't match (goods sold are more than goods shipped), then you may end up over billing the customer because you shipped less than you sold. This may be construed as fraud on your part. If you end up shipping more than you sold, then this could be a situation where the shipping clerk might be in collusion with the supposed customer. This would cost your company. Either way, they are both errors (an internal control deficiency), and could have been avoided by simply comparing sales invoices with shipping docs.

Also, I think your sticking point here is the phrase “not billed to anyone”. You can look at it this way. By comparing sales invoices with shipping docs before shipment, if they match, then that would be your cue to bill (assuming that the goods were shipped). This procedure triggers billing.

Absent the other choices, I'm just rationalizing why the answer is correct. Hope this helps.

AUD - 76
BEC - 83
FAR - 79
REG - 76

Dust yourself off and keep moving.

[Author]

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