Control procedures and tests of controls (Appendix II)

Question 1

In the sales cycle, what are the control procedures for the order and credit department?

Answer 1

1. prepare prenumbered SO
2. perform credit check (authorization)
3. Approve credit for returns
4. Follow up on old or past-due accounts
5. initiate write-offs (approved by treasurer)

Question 2

In the sales cycle, what are the control procedures for the warehouse and shipping department?

Answer 2

1. Receive approved SO
2. pull inventory and release to shipping
3. perform indpendent check of goods received from warehouse and aprpoved SO in shipping dept
4. prepare two BOL

Question 3

In the sales cycle, what are the control procedures for the billing/AR dept?

Answer 3

1. match shipping docs and SOs before preparing invioces
2. Periodically accoutn for prenumbered shiping docs
3. perform independent check of sales order pricing
4. prepare prenumbered sales invoice
5. batch/total invoices
6. update A/R master file. Agree input to invoice batch totals
7. print sales journal
8. print sales summary.
9. Mail monthly customer statements

Question 4

in the order/credit department, the following procedures are for what assertion?
Inquire about credit procedures of new customer and selecting a sample of approved SOs and examine docs for evidence of credit check

Answer 4

Valuation

Question 5

In the warehouse/shipping dept, what are tests of existence?

Answer 5

Observe warehouse personnel filling SOs

Observe evidence of independent checks

Inspect a sample of prenumbered shipping documents and agree them to the SOs

Question 6

In the warehouse/shipping dept, what is a test for completeness?

Answer 6

Inspect a sample of prenumbered shipping docs and account for PRENUMBERING