Assurance: Internal Control Systems – Revenue, sales, and purchase systems – Flashcards

1) Goods sold to customers with poor credit ratings/customers don't pay 2) Orders mis-recorded 3) Orders go unfulfilled 4) Orders accepted at wrong price

- Credit checks - Changes to credit limits must be authorised by appropriate management - Regular review of customer's credit limits by senior staff

- Review credit checks - Review customer balances compared to credit limits - Review changes to customer credit limits to ensure supported by authorisation form/email by management

- Pre-printed, standard order forms - Confirm order with customer

- Inspect pre-printed order forms

- Match customers' orders to goods despatched notes and investigate unmatched orders - Customers' order forms pre-printed, sequentially numbered, and reviewed periodically for completeness - Customer queries investigated prompty by designated individual

- Review file of orders for unmatched order forms and investigate those over a certain age

- Standard price list - Discounts must be authorised appropriate level of management

- Review standard price list - Customers receiving a discount -> trace back to email authorising discount

Risk: Orders incorrect Control: Standard pre-numbered order forms. Email customer to confirm. Trained staff. Risk: Orders accepted at out of date price Control: Authorised price list. Approval of discounts. Risk: Lost orders Control: Sequence check on system Risk: Accept orders when none in stock Control: Check stock levels Risk: Order stock that you cannot fit in the store Control: Have special arrangements in place Risk: Orders accepted from bad credit risk Control: Credit check new customers

Risk: Goods despatched but not ordered Control: Only raise GDN if have order Risk: No record of despatch Control: Ensure all goods despatched have GDN Risk: Goods incorrect Control: Check orders before leaving warehouse Risk: Goods damaged Control: Quality control check Risk: Goods not despatched Control: Reliable transport company. Review all unmatched orders to GDN. Signed copy of GDN by customer.

Risk: Invoice for goods not despatched Control: Only raise invoices if they have valid GDN. Risk: Goods not invoiced Control: Review unmatched GDN to invoices. Risk: errors in invoicing Control: Independent review. Sequence check invoices. Risk: Invoice not recorded Control: Automatic posting

Risk: Cash not recorded Control: Encourage payment by BACS Risk: Cash recorded incorrectly Control: 2 officials open post and list all amounts received on control sheet Risk: Cash stolen Control: Safe, bank ASAP Risk: No payment Control: Credit controller

Risk: Order unneeded goods Control: Approval of orders and of re-order quantities Risk: Do not order goods needed Contrl: Re-order levels based on regular stock checks Risk: Orders incorrect Control: Request confirmation of order Risk: Lost orders Control: Sequence check on system Risk: Order from poor/expensive supplier Control: Research supplier, approved supplier list

Risk: Accept incorrect goods Control: Only accept goods if agree to valid order. Risk: Goods not delivered Control: Regular check of unmatched orders, chase up supplier Risk: Goods damaged Control: Quality check before accepting Risk: No record of delivery Control: Raise pre-numbered GRN from order, sequence check on system Risk: Goods stolen Control: Physical security controls

Risk: Invoiced for goods not received. Control: Approve invoice only if agree to GRN and order. Risk: Do not recognise liability for goods received not invoiced Control: Review GRN not matched to invoices Risk: Errors in invoicing Control: Recalculate based on order/GRN Risk: Unapproved invoices paid Control: Approval procedures/review Risk: Invoices not recorded Control: Automatic posting

Risk: Do not pay Control: Supplier statement reconciliation, follow up unmatched invoices Risk: Pay too late/early Control: Flag payment dates on system Risk: Pay twice Control: Stamp invoices as paid Risk: Payment to wrong supplier or for wrong amount Control: Agree to supporting documents Risk: Fraud Control: Segregation of duties, double signatories Risk: Payment stolen Control: Pay by BACS

Risk: Hiring poor staff Control: Recruitment procedures, checks Risk: Pay leavers or not pay starters Control: Complete starters and leavers forms, agree dates to contracts Risk: Pay dummy employee Control: Pre-numbered amendment forms, approval of amendments, amendments made by HR, spot checks, line managers to sign list of employees, passport/identity reviews

Risk: Hours under/overstated Control: Pre-numbered time sheets, approved by line manager; supervision over clocking in process Risk: incorrect split between standard and overtime Control: Review of input to standard hours, analytical review every month Risk: Pay for hours not required Control: Approval of overtime

Risk: Too high/low Control: Integrate system with HR records, range checks Risk: Fraud Control: Approved pre-numbered amendment forms, exception reports printed, operating logs of amendments, review/approval of rates

Risk: no liability/incorrect liability for net pay, PAYE, etc. Control: analytical review monthly, manual reasonable check

Risk: Pay wrong employees Risk: Pay into wrong bank accounts Control: Changes to bank details in writing and approved Risk: Pay dummy employees Control: Agree number of paypackets to number of employees Risk: Pay incorrect sums Control: Agree payslip to payroll Risk: Late payments Risk: No payments RIsk: Cash stolen