What are ICO’s for receiving and processing of orders function
- Orders are received from valid customers and are complete and accurate
- All orders received from customers are processed
What are ICO’s for granting credit to customers function
- Sales transactions are made to creditworthy customers
- Credit is granted according to the Co policy
What are ICO’s for shipping products and services function
- Deliveries to customers are authorised and accurate
- Deliveries through access points are valid
What are ICO’s for recording of sales function
- All sales are invoiced accurately
- All sales are accurately recorded
What are ICO’s for receipts of payments function
- Debtors pmts are collected timely
- Debtors pmts are recorded accurately
What are ICO’s for good received function
- Only valid return of goods from customers are accepted
- All returned goods are recorded accurately
What are ICO’s for bad debts function
- Only authorised bad debts are written off according to Co policy
What are risk and ctrls of the receiving and processing of orders function
- Risk
> Fictitious customers plade orders (invalid orders)
> Goods not available/in-store
> Sales order received are not processed - Ctrls
> Approved customer list maintained
> Verbal confirmation of order details captured by sales clerk
> Sales clerk confrims availability of goods before proceeding to prepare sales order
What are risk and ctrls of the granting credit to customers function
-Risk
> Products sold to customers who are not creditworthy
> Sales made to existing customers that exceeded their credit limit
What are risk and ctrls of the shipping the products/services function
- Risk
> Incorrect product types and quantities shipped/delivered
> Theft of inventory - Ctrls
> Delivery note details matched w/ sales order by warehouse manager before shipping them
> Security guard to check and match quantities of goods dispatched w/ details of approved delivery not
What are risk and ctrls of the recording of sales function
- Risk
> Invoices/transactions recorded incorrectly
> Goods sold are not recorded in records
> Dispute over invoice by customers - Ctrls
> Customer must sign DN as proof of delivery
> Pre-numbering of all sales docs
> Dbrs clerk must match internal sales order w/ DN before preparing invoice
What are risk and ctrls of the receipt of payments function
- Risk
> Outstanding balances of dr’s are not collected
> Dr’s pmt are allocated to the incorrect account - Ctrls
> Monthly statements are prepared and sent to customers timely+
> Regular dr’s age analysis must be done
What are risk and ctrls of the goods returned function
- Risk
> Unauthorised and invalid goods returned are accepted
> Credit note issued for goods returned, but goods are not received @ warehouse - Ctrls
> A policy exists that explains the conditions and procedures for goods returned
> Pre-numbered CN are prepared for all goods returned
> Copy of CN accompanies goods returned to the warehouse
What are risk and ctrls of the bad debts function
- Risk
> Unauthorised bad debts are written off - Ctrls
> A policy exists that explains the conditions and procedures for writing off bad debts
> A senior personnel must e delegated the responsibility for approval of bad debts according to the Co policy
What is the control effectiveness formt
Headings:
Risk»_space; Ctrl»_space; Control effectiveness Test
Under CET: Format
How
- Observe
- Inspect
- Assess
- Select
- Enquire
What + detail
Why (ICO)
- To test/asses/determine…
- NEVER “TO ENSURE”
An internal auditor traces copies of sales invoices to shipping documents to
determine that:
- A. customer shipments were billed.
- B. sales that are billed were also shipped.
- C. shipments to customers were also recorded as receivables.
- D. the subsidiary accounts receivable ledger was updated.
B
Which of the following audit procedures would an auditor most likely perform to
test controls relating to management’s assertion concerning the completeness
of sales transactions?
- A. Verify that extensions and footings on the entity’s sales invoices and
monthly customer statements have been recomputed.
- B. Inspect the entity’s reports of pre-numbered shipping documents that
have not been recorded in the sales journal.
- C. Compare the invoiced prices on pre-numbered sales invoices to the
entity’s authorised price list.
- D. Inquire about the entity’s credit granting policies and the consistent
application of credit checks.
B
To determine whether credit controls are inconsistently applied, preventing
valid sales to creditworthy customers, the internal auditor should:
- A. confirm current accounts receivable.
- B. trace postings on the accounts receivable ledger.
- C. analyse collection rates and credit histories.
- D. compare credit histories for those receiving credit and for those denied
credit.
D
Shipping documents should be traced to and compared with sales records or
invoices to:
-A. determine whether payments are properly applied to customer accounts.
- B. assure that shipments are billed to customers.
- C. determine whether unit prices billed are in accordance with sales
contracts.
- D. ascertain whether all sales are supported by shipping documents.
B
Vouching entails verifying recorded amounts by examining the underlying
documents from the _______________ documents to the _______________
documents.
- A. final; original.
- B. final; previous.
- C. original; final.
- D. original; subsequent.
B
What are the headings when completing an engagement finding
- Criteria
- What SHOULD be in place? - Condition
- What IS in place? / What was discovered?/ Usually a weakness in process (lack of or inadequate controls) - Cause
- What is the reason for the deviation? - Effect
- What is the IMPACT of the deviation? - Significance rating
- How do you evaluate the findings? - Recommendation
- What is the recommendation that addresses the CAUSE?
What are the 3 audit engagements
- Financial engagements
- Operational engagements
- Compliance engagements
