Sales System

Control objective

(D(
3
 Orders are only accepted if goods are available.
-

Ca(
 Only supplied to customer with

Old: available credit limit

-

New: good credit rating

ecoin
 All orders are dispatched / fulfilled.

(q) S of goods are dispatch.

 Correct (item / quantity / condition)

(5)[
 All goods dispatched are correctly invoiced.
collect
debt

2
Internal control procedure for sale system (SOP)

Customer

(1) Check Inventory

(Goods available)
I. Receiving order
(2) Check Credit limit and rating
(Source: sales order form)

(3) Recording in sales order form

(1) Pack Goods

II. Dispatch Goods

(2) Recording in GDN
(Source: goods dispatch note
-GDN) (3) Send Goods.

(1) Prepare sales invoice

[Link]
(2) Maintain customer master file.
(Source: sale invoice)
(3) Record in ledger accounts.

(4) Segregation of duties.

(1) Credit controller

IV. Collecting Debt

(2) Review Age receivable list

3
 (1) Check inventory (Goods available)

(2) Check credit limit and rating Isetc limit

I. Receiving order (a) (b)

(3) Recording in sales order form

(a) <b>

Deficiencies Direct control Test of control

(control recommendation)
1. Inventory availability does not
-
Prior to the salesperson X ObserveC
-
the procedures for
appear to be checked by the sales checking inventory
-

-
finalizing the order, the
person at the time the order is availability.
placed. Enzut
inventory system should be S
checked in order for an
accurate assessment of the -
C
Review customer complaint
There is a risk that where goods files for evidence of
-

are not available, this could lead to availability of goods to be unfulfilled goods.
Reason - -

unfulfilled orders and customer notified to customers. S

- -

dissatisfaction, which would impact

-

Risk the company’s reputation.

-

*
(2) CCustomer credit limits are set by
-
Credit limits should be set by Sample of new customers
-

receivables ledger clerks.> a senior member of the accepted in the year,

(a) Event
Creview the authorization of
2
- -

Credit limit are not review receivables ledger

-

- -

Credit limit are not change.J . department the credit limit, and ensure
-

Receivables ledger clerks are not that this was performed by

Reco sufficiently senior
- -

These limits should be a responsible official.

-

So may set limits too high, leading

-
regularly reviewed by a >
-

&

to irrecoverable debts, or too low, responsible official.

Risk leading to a loss of sales.
-

*****
(2) New customers’ credit worthiness
-
New customers should Inspect a sample of

=
(b) is assessed by a salesperson complete a credit application processed credit
Event -

which should be checked applications from the credit

The sales staff have sales targets,
-
through aL credit agency with agency and ensure the
and may suggest that new a credit limitset. same credit limit appears in
D
-

customers are creditworthy simply the sales system.

Reason -

to meet their targets.

-
S
This could result in sales being
-

made to poor credit risks.

Risk
-
-

4
 Deficiencies Direct control Test of control
(control recommendation)
(3) Orders are given a number based Sale order should bePainted X Re-perform the control by
Pare
undertaking aC
-
- -

(a) on the sales person’s own

-
sequentially numbered. sequence
identification number. These
-
check of sales orders.
&
numbers are not sequential. Engury-
-
On a regular basis, a
Discuss
- any gaps in the

S
X
Without sequential numbers it is sequence check of orders sequence with sales
should be undertaken to
-

difficult to
C Iidentify missing orders
-
ordering staff.
and to monitor if all orders are
-
identify any missing orders. S

being dispatched in a timely

-

manner.
-

This could lead to a loss of customer

-

-
goodwill.

**
Frit
(3) Customer orders are only two-part, The order form should be at C order form
Review sale
Event(b)
-
-

one copy is left with the customer least four-part.

-

and one with the sales person.

S
book to ensure four-parts.
-

The sales department does not hold This would send to

-
these orders centrally and hence C -
Inspect whether to receive
5
customer; dispatch
-

would not be able to monitor if department; finance copy of sale order in all
Reason .

department
S
- -

orders are being fulfilled on a timely department& and C

-
-
sales
-
basis. department.&

This could result in a loss of revenue

-
Risk .
and customer goodwill.
-

In
Ea

5
 So = GDM = Sale Invo

u V

(1) Pack Goods

II. Dispatch goods to customer (2) Recording in GDN caz abi cas dy
(3) Send Goods

Deficiencies Direct control Test of control

(control recommendation)
So
1 A daily pick list is used by the They should check when
-
Visit a warehouse and
observeC
-

dispatch department when sending goods pack; in C correct whether all goods
out customer orders. quantities and product are double checked against
- -

S C
Ereif
-

descriptions,
S as well as the so
GDN and dispatch list
However, it does not appear that the checking theC quality of goods before sending out.S
-

goods are checked back to the being dispatched to ensure

-
&
original order.
-
they are not damaged.3
Rea Incorrect goods may be sent out.
-

This will result in a loss of customer

goodwill.
-

Risk .

(2) Goods dispatch notes (GDN) are

-
GDNs should all be Prepainted Using a computer (or
-

given the same number as the sequentially numbered using manually) test the
(a) - -
-

order number to which they relate. a sequence which is different numerical sequence to
-

(not sequential number) Event

-

The DGN without separate

-
sales
S
to the order number.
M
C
ensure it is complete.S
GaN -

sequential numbers, it is difficult to On a regular basis, a

-

- -

Reason identify if any GDNs are missing.

-
M
-
sequence check of GDNs
If GDNs are missing and the should be undertaken to
company fails to raise invoices in a identify any missing dispatch
-

timely manner, this could lead to a notes.

-

Risk loss of revenue.

-

* Eret
(2) The finance department does not
- -
Upon dispatch of goods, a ReviewC
-
GDN form book to
receive a copy of GDNs, they will four part GDN should be ensure four-parts.
S
(b) -

not know when to raise the related completed,

sales invoices. Rea -
Inspect whether to receive
-

- -

This could result in goods being

-
With copies to theC
customer,S copy of GDN in WH and
dispatched but not being invoiced, C
warehouse department,3C sales finance department.
-

leading to a loss of revenue. departmentCto confirm

.
-
-ist dispatch of goods and a copy
* for theC
finance department.
D

COnce the copy of GDN

received;-finance department
prepare
C sale invoice.S

6
X
 Deficiencies Direct control Test of control
(control recommendation)

(2) The sales order department of The GDN should be at least =

Test the numerical
C
-
-

(c) does not receive a copy of the four part. One copy should be sequence of sale order to
-
-

GDN. sent to the sales order ensure it is complete.

-

zunut -

* spect(wheth to
-

They are not able to monitor the department. S copy

ay
recen

- G Dal in sales dept)

orders are being fulfilled on a timely ⑪ ReviewC a sample of
..

-
basis. C
Once the copy of the GDN unfulfilled ordersSand
-

Rea

=
This could result in a loss of
-
received matched to the -C to why these
enquire as
revenue and customer goodwill. order. remain outstanding. S
Risk .
↑

* Regular review of unmatched

-

N
orders/ identify any unfulfilled
-

orders.
↑

(2) GDN are sent to finance

-
Ent The copies of GDN sent toCall Enquiry as to theCtiming of
-

(d) department on a weekly basic

- -
department3 daily GDN received by finance
If finance department does not
-
Finance department should department2
promptly received GDN. Ra
-
undertake sequence check of
This could result in; goods being
-
the GDN
dispatch but not invoice
-

Revenue
-
cut-off errors and
understated receivable Russ .
-

*
(3) For goods dispatched by local
-
Entity should remind all local Select a sample of
- -

couriers, customer signatures are

- -
couriers that customer dispatches by couriers and
not always obtained. signatures must be obtained
-

- ask entity for proof of

This can lead to customers falsely as proof of delivery and
-
delivery by2viewing
claiming that they have not received payment will not be made for
- -

their goods. Entity would not be able any dispatches with missing customer signatures. J ..

to prove that they had in fact signatures.&

dispatched the goods and may
-

result in goods being dispatched

twice.
-

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 (1) Sale Invoice (a) (b, 1
1
(2) Customer master file
III. Recording
(3) Recording in Ledger Calabas .

(4) Segregation of duties 1-

Deficiencies Direct control Test of control

(control recommendation)
(1) Additional staff has been drafted in
-
Only the sales clerks should Observe theC procedures in
(a) to help the sales clerks produce the be able to raise sales invoices.
-

- - - S
sales invoices raise.
sales invoices. Event
observe (who
-

As the extra staff will not be as

-
As consideration should be
experienced as the sale increased
-
given to recruiting and training Produc sala ]
Invoice
risk of mistakes being made in the more permanent sales clerks
-

-
-

sales invoices. Rea

-
who can produce sales
This could result in customers
-
invoices.
being under or overcharged leading
-

to misstated revenue and

-

dissatisfied customers. Risk

-

*
(1) Discounts given to customers are
-
The authorized sales prices SCompare a sample of
-

(b) manually entered onto the sales

-
file should be updated by a invoices with the
-

invoices by sales clerks.

-
responsible official Kinector authorized price
-> list and
owner
credit terms to ensure they
.

This could result in unauthorized CRegular review Sof sales are accurate.
sales discounts being given as discount levels should be
-

there does not seem to be any

-
undertaken by the sales Review the-
-
sales discount
authorization required. director, and this review report for evidence of
This will leading to the sales should be evidenced. review by the sales
- -

Closs
-

invoice being overstated and a director.S

Th
-
>

of customer goodwill.
XInderstate
** Loss Reme
The Auditor
(2)
Receivables ledger clerksC record Addition/ amendments to Attempt to amendment
N -

new customer details TC and credit master

- file data should be customer master file data
limits
S in the customer master data restricted so that only
-
-to determine -
whether the
file and these --
-
changes are not supervisors and above can amendment is rejected.S
Y Event
-
reviewed make changes. ↑

The receivables ledger clerks are

-

not senior enough to be given

Rem-
access to making changes to
-
-

master file data as this could

-

increase the risk of fraud.

-
Skisk
&
.
Sales Invoice
To
is Ba 006

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8
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 Gend laches
Recording Ledges sale Alc
*

Sep 1 : SI-001 $10A) Sep 2S

91009 12
-

2
2 : S1-002 + 20 (mrB) Sap3 Su
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3 : S1-003 $50
(MrA) RL Contro Alc
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25
Sep 2
Sep
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-

Rec Leder
My A me B.

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Sept Sep
2 .

Se 3 -
Su
=
an u & -

me A 40
B 20

(3([a] ↓ Sent
-
6 N

dis A
statut to
Prepare customer >
-

manty .

Sep
is
2
Sep & -

a
↑

Sepsc
3(b) Reconcition
Control
of
Ala & leger
Individi
Rec lecher Control AC A la Total .

$ &

Sep so
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over-add
Adj : [WS
Accbul- Eur
- -

Fl
(Prepped by
-

-
Check/Rendby,

Final Controlle
(3)() Review
by
CFC)
 Deficiencies Direct control Test of control
(control recommendation)

(3) Customer statements are no longer

- -
The entity should produce ReviewCcustomer
(a) being generated and sent to correspondence files
Sfor
-

monthly customer statements

Cevidence of sending
- -

customers.
for all customers and send customer statements
-

EIfthisstatements are not sent regularly,

- a

increases the likelihood of

them out promptly. S
monthly.
.

- -

errors and any disputed invoices

- - - -

not being quickly identified and

-

resolved.
-
3
*
(3) The receivables ledger control
-
The receivables ledger control For a sample of
-

(b) account is only reconciledC

-
at the account should be reconciled reconciliation with
-

4
-

end of year
&in order to verify the reconciliation item trace to
Cidentify
on a monthly basis to
yearend balance. supporting document to
any errors which should be
confirm that error have
C-
If the receivables ledger is only
-
3
investigated and corrected. been corrected.J ...

reconciled annually, there is a risk

-
Review the reconciliation
that errors will not be spotted
-
for a signature as evidence
promptly. of review.
C 3
-

Receivables may be misstated.

&

(3) Receivable ledger control account The receivable ledger Test a sample of
-

Es
reconciliation is only review by FC reconciliation statement should reconciliation statement for
(c)
if there are any unreconciled item. be reviewed by the FC on a ---
evidence of signature by
-

monthly. FC.S
Could reconcile but still contain
-
-

significate errors. The review should be

evidenced by way of signature.
If not review, reduced its
C
-

effectiveness.
-
>
*
- C
(4) The clerk, is responsible for several The key roles ofC
-
posting bank Review the log of IDs of
-

elements of tasks. K
receipts, updating the sales individualsCwho have

S
ledger
& and performing bank -

posted bank receipts S and

There is a lack of segregation of reconciliations should be split
between different individuals. C
updated the sales ledgerS to
duties.
-

assess whether these are

a
-

Errors will not be identified on a -

timely basis. There is also an x m, pop

:
C
different individuals.
-
-

u
3
increased risk of fraud.
-

X Rec All (eng2 : b :)

-

Xo : sammin
*
A
SplitPerdiffernt
Sun

9
 1
(1) Credit Controller
.

IV. Collection of Debt

-L
(2) Review Age receivable list
S
Deficiencies Direct control Test of control
(control recommendation)
1. The sales person / client service CA credit controller should be
- -
Review theC aged
manager is given responsibility to appointed and it should be receivables reportSand
-

chase customers directly for their role, rather than the -

discuss the action taken on
-

payment once an invoice is salesperson.S

-

old/ overdue balances with

CIf taken leave by credit
-

outstanding over credit term. credit controller.

S
-
CNo credit controller.
S controller, temporary credit ↑

CThis could result in an increase in controller should be recruited.

-

- S
irrecoverable debts and reduced
profit and cash [Link] CTo chase any outstanding
sales invoices which are more
**** than credit term.
S

(2) -
Not review age- receivable listing.&The receivable ledger clerk
Not followed
- - up overdue should performs a monthly Obtain copy of aged
receivable balance. receivable report and
-

review of the aged receivable -

-
Could result increase risk of
listing. -
confirm there is evidence of
D
irrecoverable debts. review such as signature by
S
the receivable ledger clerks.
① Identifies those aged more
&

Should review a sample of

than credit limit which are
-
* followed up documentation
followed up by C credit control from credit control
department.S department to confirm
action taken.
De

10