Sales system

Control objectives for sales and dispatch system:

1. To ensure that orders are only accepted if goods are available to be processed
for customers.
2. To ensure that all orders are recorded completely and accurately.
3. To ensure that goods are not supplied to poor credit risks.
4. To ensure that goods are dispatched on a timely basis.
5. To ensure that goods are dispatched correctly to customers and they are of an
adequate quality.
6. To ensure that goods dispatched are correctly invoiced.
7. To ensure completeness of income for goods dispatched.
8. To ensure that sales discounts are only provided to valid customers.

Sales system control measures:

1. Sales order placed
a. All sales orders documented on a sequentially documented numbered multi-
part SALES ORDER FORM.
b. Confirm the customer (writing, telephonic sales, call recording)
c. Inventory check
d. One copy of GDN sent with the goods, one copy in warehouse, one copy to
invoicing department
e. New customer: Credit checks, obtaining trade/bank references, setting a credit
limit authorized by the sales director
f. Existing customer: Credit limit regularly reviewed and maintained on the basis
of levels of sales transactions and credit risks
g. Discounts to be authorized
h. Follow up on unfulfilled orders on a regular basis: a sequence check of orders
i. Access to master files only to senior personnel

2. Goods dispatched
a. Sequentially pre-numbered GDN
b. Upon dispatch, GDN should be matched to the sales order
c. Regular review of unmatched orders to identify unfulfilled orders
d. Signed by warehouse manager after quantity and quality check
e. 3 copies (warehouse, customer, invoicing)
 f. Customers should sign the copies to acknowledge the receipt of goods

3. Sales invoice: preparing and entering

a. Sequentially pre-numbered invoices
b. Matched to GDN
c. 3 copies (invoicing, customers, sales daybook clerk if applicable)
d. Authorized price list used to prepare invoice
e. Authorized discounts
f. Sequence check on GDNs to ensure all GDNs have been invoiced
g. Sequence check on invoices to ensure all invoices have been entered
h. Customer statements to be sent monthly
i. Sales ledger control account reconciled with individual ledgers on a monthly
basis. Reconciliations reviewed by senior personnel and evidence their
review.

4. Payment receipt
a. Match payment to invoice
b. Check validity of settlement discounts if used
c. Segregation of duties: RECEVING PAYMENT and RECORDING
d. Bank transfers encouraged
e. Bank reconciliation statement prepared on a monthly basis

5. Goods returned
a. Sequentially pre-numbered credit note
b. Signed by the manager
c. Matched to invoice

6. Other controls
a. Aged receivables reports- prepared monthly and reviewed by senior officer.
b. Exception reports: created and viewed

Purchase system

Control objectives for purchase system:

a. Procurement is made only when the requirements are genuine
b. Purchases are made at the most optimum prices and terms
c. Purchases meet the required quality standards and id substandard quality is
accepted, should be at negotiated terms.
d. Payments are made according to the agreed term
 e. They are procured on a timely basis.

Purchase system control measures:

1. Purchase requisition
a. Sequentially pre-numbered
b. Authorized to ensure only required goods are ordered
c. Monitor inventory level or re-order level set
d. Inventory level or re-order level checked before raising requisition

2. Purchase order
a. Sequentially pre-numbered
b. Matched to requisition form
c. Authorized supplier list to be used (updated annually)
d. Purchase order to be authorized
e. 3 copies (supplier, order department, warehouse)
f. Follow up on unfulfilled orders: by creating exception reports and sequence
check

3. Goods received
a. Sequentially pre-numbered GRN
b. Matched to purchase order
c. Signed by the warehouse manager after quantity and quality checks
d. 3 copies (ordering department, warehouse, accounting)

4. Invoice received from the supplier

a. Match to GRN
b. File in an order (cannot be sequentially pre-numbered) but should be
numbered manually
c. Arithmetic checks
d. Entered in the ledger/day book on a daily basis
e. Application control(document count, digits checks, range checks, etc.) should
be applied to ensure completeness and accuracy over the input of purchase
invoice
f. Stamp ‘entered’ when recorded
g. Segregation of duties (ORDER PLACEMENT, GOODS RECEIVED and
RECORDING)
h. Monthly reconciliation: PL to PLCA
 5. Payment made
a. Segregation of duties (ORDER PLACEMENT, GOODS RECEIVED and
PAYMENT)
b. Senior personnel should match the invoices to the GRN before approving
invoices for payment
c. Bank transfer preferred
d. Senior personnel should be present if the payment is through CHEQUE
e. Two signatures in cheques for a high amount
f. Stamp invoice “paid”
g. Try gaining settlement discounts
h. Pay according to the supplier’s terms to maintain supplier goodwill
i. Payment for specified invoices (avoid payments where no specific invoice is
mentioned)
j. Supplier statement reconciliation with PL
k. PL reconciliation with PLCA
l. Bank reconciliation on a monthly basis

6. Goods returned to the supplier

a. Sequentially pre-numbered debit notes
b. Authorized
c. Supplier analysis to identify consistent quality problems

Payroll system

Control objectives of payroll system:

1. Wages and salaries are paid at the correct date
2. Wages and salaries are paid to the right people
3. Wages and salaries are paid on time

Business risks of the payroll system:

1. Risk of additional expense to the company
2. Risk of incorrect salary payment
3. Risk of fraud or error
4. Loss of employee
5. Risk of misstated figures
Key terms:
1. Clock cards/Time sheets
a. Used to track the hours of the staff

2. Payroll sheet
a. Used to calculate the salaries of the staff using their worked hours and hourly
pay rate

3. Pay slips
a. Description of the salary, benefit, allowances, etc. of the staff of that period
b. Given to the staff as a detailed document

4. Bank transfer list (instruction to the bank)

a. The list of salary payments to be processed by the bank
b. Should be reviewed and approved by the finance director first before being
processed by the bank

5. Employee master file

a. Contains all the information about the employees and their pays
b. Should be amended/updated by senior staff only
c. Junior staff to be given read-only access
d. A log of changes/amendments to the master file should be kept and reviewed
on a regular basis
e. Match standing data to the personnel files periodically

Stages of the payroll system

1. Appointment/Leavers:
a. All appointments of the staff should only be done by the human resource
department, which is separate from the payroll department.
b. There should be formal procedures requiring interviews.
c. Manager to provide detailed written notification to a responsible official of
starters and leavers.
d. Update “starters and leaders” details on a timely basis. Procedures should
ensure that details should be added or deleted from the master file
immediately after starting or leaving company’s employment.
e. All increases of pay should be proposed by the HR department and then
formally agreed by the BOD.
 At random intervals, a more senior responsible official of the company should
access the wages master file and examine its contents to the manual records
maintained, input documentation and notifications from the interviews manager
as appropriate.

2. Calculations
1. Clock cards are sequentially pre-numbered
2. Clock card machine should be supervised or in open view (to make sure there
is no dummy attendances recorded)
3. Head count by area supervisor (to match the attendance to employees
present)
4. Any overtime worked should be reviewed and authorized with evidence of
authorization (signature)
5. Periodic verification of staff cards with personal files of employees (to ensure
there are no ghost employees)

Gross pay, deductions and net pay:

1. Preferably automatically calculated by the payroll system

2. Calculations re-checked on sample basis (to be done by a senior staff and
compared to the output from the system)

3. Payments
1. Pay slips to be sequentially pre-numbered
2. Segregation of duties (PAYROLL SHEET, RECORDING and PAYMENT)

Salaries:

1. Preferably through bank transfer

2. Bank transfer list matched to the payroll sheet by a senior staff prior to the
authorization of the bank payment
3. When authorizing the payments, the responsible official should on a sample
basis perform checks from payroll records to payment list and vice versa to
ensure that the payments are complete and only made to bona fide
employees.
4. Bank transfer list to be authorized by a different senior staff who authorized
the payroll sheets
 Wages:

1. All cash wages should be paid on the basis of the employee’s clock card and
photographic identification as this confirms proof or identity.
2. Uncollected wage cash should be kept in a safe place or deposited in a bank.

Cash and bank

Control objectives of cash and bank system:

1. All money is recorded.
2. All money received is banked.
3. Money is properly safeguarded.
4. Payments are made to correct persons and properly recorded.

Petty cash system

1. Petty cashier should maintain petty cash report.
2. Every expense should be supported by an invoice.
3. Invoice + Cash at till = Float

Reconciliation:
1. It should be done by agreeing balances from petty cash report to the expense
vouchers and invoices.

Cash and credit controlling system:

1. Unique login code for each till
2. Only the designated employee should have access to the till
3. Maintain cash receipt report for each customer
4. Every receipt should be supported by an invoice
5. Totaling should be done till-wise
6. Counting and recording should be done by separate individuals

Reconciliation:
1. It should be done by agreeing sales sheet with the cash count sheet.
Recording
1. Recording of transactions and receipts should be done on a daily basis.
2. Each day’s receipt should be recorded in the customer account or the sales
account.
3. Reconciliation should be done by agreeing cash receipt report with the customer
accounts.

Deposit
1. Deposition of cash should be done on a daily basis.
2. Each day’s excess should be banked.
3. Cash in transit (CIT) should be insured from an insurance company.
4. Any cash left at site should have strong physical controls.
5. Minimum cash balance to be maintained should be decided.

Bank and cheques:

1. Match bank deposit slips with the cash and cheque receipt register.
2. Monthly bank reconciliation statements should be performed and differences
should be investigated. These should be reviewed by senior officials.
3. Segregation of duties between the person receiving the money, the person
depositing in the bank and the one making payments.
4. Periodic management review of the register to be conducted to ensure that
cheques are promptly deposited into the bank.
5. Unused cheques to be kept under lock and key.
6. Cheque books to be in the custody of a responsible official.