ACCOUNT TITLE: Sales Assertions and Controls Existence/Occurrence Recorded sales are for actually made to costumers. 1. Recording of shipments does not have any records of costumer orders, sales orders approved by the owner, and no need for approved shipping documents. 2. A charge sales invoice is issued to sales transaction that requires shipments. It is attached on the delivery package; to be received and verified by the costumer. The original copy is keep as basis forcollection/payment. 3. The way-bill/bill of lading from the shipper is obtain in order to keep record and trace the product. 4. For deliveries within the city, the drivers will be given a copy of the Sales Invoice where the costumer will sign upon receiving the product/s. It will be returned to the Accounting department as a proof that the goods were already delivered. 5. Sold goods that are still on display are label with a note “SOLD to: xxx”.
Possible Misstatements
Goods dispatched may not agree with goods ordered. Sales may be made to unauthorized customers.
Procedures to be Done
Inquire the person in-charge for shipping goods. Examine charge sales invoices.
Examine a sample of original sales invoices to determine whether each one has a shipping document (way-bill/bill of lading) attached.
Invoices maybe made for fictitious transactions.
Compare a sample bill of lading to its charge sales invoice.
Shipped goods appearing in the documents may differ to what was actually delivered by the company.
Observe procedures and inspect documents pertaining to deliveries.
Product/s delivered might include other products not listed in the invoice.
Mistakes in delivery may not be discovered within the period.
A product can be sold twice to another costumer.
Cash receipts recorded in the accounts represent cash received from costumers during the period.
1. A clerk records the accounts receivable, prepares and mails monthly statements to costumers for trade accounts receivable and follows up on any complaints.He/She is the also the one who collects payments. 2. A collection receipt is issued when payment is received and it is then attached to the charge invoice for matching. Sales adjustment transactions recorded in the accounts represent discounts, returns and allowances, and bad debts applicable to the
Observe and make inquiries about the performance of various functions. Inquire by sending letters to a sample of accounts receivable customers to verify whether they have an outstanding balance at December 31, 2015.
Errors in recording sales on account may not be detected.
Made-up receivables may exist.
Collection for payment may be recorded as sales for the current period.
period. 1. Sales clerk are oriented to give discounts to the extent imposed by the management. Large discounts are communicated to the manager (in the absence, the accounting department). 2. Sales returns and allowances are communicated between the selling department and the costumer. Agreed terms are then carried out and then communicated to the accounting department. 3. The receivables from costumers will be deemed uncollectible if within 1 year, they can’t still pay.
Observe procedures and examine follow-up lines.
Improper judgement on the
discounts given may affect sales significantly.
Existing illegal terms
communicated between parties may not be discovered.
Inquire information on the process and conditions when a costumer returns the product and/or asks for allowance.
Review the entity’s records on the costumers account. Inspect on the trends in bad debts.
The person-in-charge may write-
off wrong accounts.
Completeness All sales transactions that occurred are recorded. 1. Pre-numbered charge sales invoices are accounted for to determine that sales are recognize. 2. Pre-numbered cash sales receipts are accounted for to determine that cash sales are recorded. 3. All records on sale are being inputted in their information on the basis of their issued invoices (charge sales invoice and cash sales invoice). All cash received from the costumer during the period are recorded as cash receipts in the account. 1. Pre-numbered collection receipts are accounted for to acknowledge payment of credits by the costumer.
Accuracy All sales, cash receipts and sales adjustments are properly recorded. 1. Their receipts and invoices are their source of information on sales made during the period.
Some sales may not be invoiced.
Observe and make inquiries
about the use of pre-numbered documents and inspect evidence of accounting for the sequence.
Erroneous receipts issued may not be detected immediately. Some sales would not be posted in the information system.
Collections may be posted to the wrong costumer account.
For a sample of shipping
documents selected from shipping records, trace each shipping document to a transaction recorded in information system.
Review on the records of the
costumer’s payments (collection
receipts) and match it to the charge sale invoices made.
Sales may have incorrect prices.
Fictitious sales transactions may be recorded.
Vouch recorded sales to supporting documents.
Cut-off All sales, cash receipts and sales adjustments are properly recorded in the current period and those arising after the period end are included in the next accounting period. 1. Procedures to ensure timely recording of sales and proper cutoff are established.
Rights and Obligations Sales recorded represent only sales transactions. 1. Clerk checks sales invoice for terms determine that transactions is a sale rather than a consignment. 2. It has Memorandum of Agreement (MOA) to its consignee to properly agree on terms and conditions on sales.
Valuation/Measurement Sales are correctly billed and recorded. 1. For all goods to be shipped, the sales clerk is assigned to check on the products to be delivered and/or to be shipped if it corresponds to what is recorded in the invoice. 2. On rare cases, the company accepts sales on account from the friend of the owner. Costumer credit is approved by the manager only.
Examine sales invoices for the last five sales transactions recorded in the information system in 2015 and examine shipping documents to determine they are recorded in the correct period.
Sales occurring during the period may not be record for the year but would be recorded for the next year.
Obtain a copy of MOA. Inspect and understand the terms that have significant effects on the sales transactions cycle. Understand the nature of the sales and observe on how consignment transactions are treated.
Wrong judgement towards recognition of sales maybe given.
More or fewer goods may have been shipped than ordered. Customers returns may occur.
Some costumers will receive favor on their credit terms and selling price. Accounts receivable may be uncollectible.
Observe procedure. For a sample, examine signature on documents evidencing performance.
Inquire and examine sales credit for selected transactions.
Inquire on the person in-charge of making shipments.
3. There is no authorization needed from the manager prior to merchandise shipment. 4. Sales invoices are reviewed by the purchasing officer for proper pricing and discounts.
Sales may be made to unauthorized customers.
Observe procedure. Inquire on their standard discounts given and compare to what was actually given.
Large variance on cost and selling price might occur.
Observe procedure. Check on the information system used.
5. Sales transactions are directly recorded in the information system. It doesn’t maintain a ledger.
Mistakes in recording in the information cannot be traced from other records. Errors in accounts receivable increases.
ACCOUNT TITLE: Cash Assertions and Controls Existence Completeness Accuracy Cut-off Classification
ACCOUNT TITLE: Inventory Assertions and Controls Existence Completeness Accuracy Cut-off Classification
Possible Misstatements
Procedures to be Done
Possible Misstatements
Procedures to be Done
ACCOUNT TITLE: Accounts Receivable Assertions and Controls Possible Misstatements Existence Completeness Accuracy Cut-off Classification
ACCOUNT TITLE: Accounts Payable Assertions and Controls Existence Completeness Accuracy Cut-off Classification
ACCOUNT TITLE: Expenses Assertions and Controls Existence Completeness Accuracy Cut-off Classification
