A system of internal control consists of policies and procedures designed to provide management with reasonable assurance that the organization achieves its objectives and goals.
Credit Approval Form For credit sales, the client must have a formal activity procedure for investigating the creditworthiness of the customer.
Open-Order Report A report of all customer orders for which processing has not been completed. Shipping Document This document generally serves as a bill of lading and contains information on the type of product shipped, the quantity shipped and other relevant information.
Sales Invoice The document is used to bill the customer. This document contains information on the type of product or service, the quantity, the price and the terms of trade.
Sales Journal Once a sales invoice has been issued, the sale needs to be recorded in the accounting records. The sales journal is used to record information about the sales transaction.
Customer Statement This document is mailed to the customer and contains details of all sales, cash receipts, and credit memorandum transactions. Accounts Receivable Subsidiary Ledger This ledger contains an account and the details of transactions for each customer.
Aged Trial Balance of Accounts Receivable This report summarizes all the customer balances in the accounts receivable subsidiary ledger. Each account is classified as current or placed into one of several past due categories. Types of Documents and Records Shipping Goods should not be shipped, nor should services be provided without proper authorization.
The main control is Credit Authorization payment or proper credit authorization. The credit authorization process must determine that the customer is able to pay for the goods or services purchased. Failure to properly authorize credit can lead to extensive bad debts for the entity.
Billing The objective of proper billing is to ensure that all goods shipped and all services rendered are billed to the customer. Assertions about Classes of Transactions Revenue cycle All revenue and cash receipt transactions and events Occurrence that have been recorded have occurred and pertain to the entity.
All revenue and cash receipt transactions and events Completeness that should have been recorded have been recorded. Amounts and other data relating to recorded revenue Accuracy and cash receipt transactions and events have been recorded appropriately.
Cutoff All revenue and cash receipt transactions and events have been recorded in the correct accounting period. All revenue and cash receipt transactions and events Classification have been recorded in the proper accounts.
Occurrence The auditor is concerned about two major types of material misstatements: Sales to fictitious customers. Recording revenue when goods have not been shipped or services have not been performed. The auditor needs assurance that all recorded revenue transactions are valid.
Control procedure to prevent violation of completeness: The sales invoice should also be verified for mathematical accuracy before being sent to the customer.The internal audit team uses Wdesk for process narratives, risk and control matrices, and some process flowcharts—using the process narratives as source data.
The company anticipates putting its testing and COSO Framework documents as well as certifications in Wdesk in the near future. PCAOB Auditing Standard no. 2, An Audit of Internal Control Over Financial Reporting in Conjunction with An Audit of Financial Statements, says when the auditor identifies a material misstatement in the current-period financial statements that was not initially identified by the company’s internal control over financial reporting, it is a.
This audit evaluated internal controls, identified fraud risks, and assessed potential abuse of city policy and possible waste of city resources. This report answers the following questions.
IT general controls (ITGC) are controls that apply to all systems, components, processes, and data for a given organization or information technology (IT) environment. The objectives of ITGCs are to ensure the proper development and implementation of applications, as well as the integrity of programs, data files, and computer operations.
Audit and Assurance September Answers Section A 1 B Narrative notes – This method can make it more difficult to identify missing internal controls as the notes record the detail but do not identify control exceptions clearly. Questionnaires. Since our audit would not necessarily disclose all significant matters in the internal control structure, we do not express an opinion on the set of internal controls for these various systems taken as a whole.