Auditing assignments.
Below is a list of controls typically implemented in the processing of sales transactions.
Required
For each control identified, briefly indicate the financial misstatement (or misstatements) that could occur if the control is not implemented effectively.
Identify a test of control that the auditor can do to determine the effectiveness of the control
A suggestion for the format of the answer is to use a table with two columns, one for each possible misstatement and one for the corresponding test of control.
Controls Typically Found in Sales Processes
All transactions under $10,000 may be approved by the computer authorization program. The credit manager must approve all transactions over $10,000.
All invoices are priced according to the authorized price list maintained on the computer. Either the regional or divisional sales manager must approve any exceptions.
All shipping documents are pre-numbered and periodically accounted for. Shipping document references are noted on all sales invoices.
Customer complaints regarding receipt of goods are routed to a customer service representative. Any discrepancies are immediately followed up to determine the cause of the discrepancy.
All merchandise returns must be received by the receiving department and recorded on pre-numbered documents for receipts. A document is created for each item (or batches of like items).
Returns are sent to quality control for testing, and a recommendation for ultimate disposition is made (scrap, rework and sell as a second, or close out as is), noted, and sent to accounting for proper inventorying.
The quantity of items invoiced is reconciled with the packing document developed on receipt of the order and the shipping notice by a computer program as the goods are marked for shipment. If discrepancies appear, the shipping document prevails. A discrepancy report is prepared daily and sent to the warehouse manager for follow-up.
7. The company pays all freight charges, but the customer is charged a freight fee based on a minimum amount and a sliding scale as a percentage of the total invoice. The policy is documented and the computer automatically adds the charge.
