Sales and Purchases Flashcards
Revenue Numbers: Increase in revenue > increase in COS GPM increase Increase in price per unit/volume Increase in revenue per employee
Inquire with management to establish commercial reasons why
Review budgets/forecasts for the year to ascertain if revenue higher than expected
Obtain breakdown by region/product/service to identify anomalies
General procedures for sales system:
Inspect delivery note for date of delivery to customer (cut-off)
Trace revenue transactions back to invoice/despatch note/sales order
Vouch revenue receipts to bank statements Data analytics for three-way match between invoice/despatch note/sales order
Inspect goods returns/customer correspondence and trace credit note to debit record in revenue Inspect post year end cash payments to customers for refunds and compare to returns provision at year end
Reconcile returned goods to inventory records
Use the Cascade-Revenue module to identify notable or unusual transactions
Client sales system
Customer places sales order and goods despatched
Agree goods to be despatched to sales order
Despatch notes numbered
Goods delivered
Goods signed for by customer; Delivery note issued to customer
Sales invoice sent
Agree to sales order/despatch note/delivery note/price lists
Regular review of despatch notes not matched by invoice
Payment from customer
Match cash receipts to invoice; segregation of duties;
follow up overdue amounts; authorisation for bad debt write off
Credit note issued to customer for goods returned
Check goods returned; authorisation of credit notes; provision for returns
Revenue Scenario:
Cash received before/after goods/services provided:
revenue recognition risk
Inspect contract with customer to establish terms and performance obligations
Inspect correspondence with customer to establish goods/services provided
Recalculate revenue to be recognised/deferred(accrued) income
Compare discount rate to market rates and recalculate PV
Revenue Scenario: Goods/services provided over time:
revenue recognition risk
Inspect contract/correspondence with customer to establish terms and work performed
Recalculate revenue to be recognised/deferred(accrued) income
Inspect schedule of costs incurred to date
Obtain work certifications to verify portion of work complete
Receivables Numbers:
High compared to increase in revenue
Receivables days increase
Receivables days > credit terms
Inquire with management to establish commercial reasons why
Data analytics to identify all aged amounts
Analyse management bad debt allowance calculation and reperform
Obtain customer confirmations of balances and reconcile with receivables
Inspect correspondence to assess if overdue balances will be paid
Inspect credit policy/sales contracts
Inspect post year end transactions to see if payment made
Inspect credit notes raised post year end
Data analytics for three-way match between invoice/despatch note/sales order
Use the Cascade-Revenue module to identify notable or unusual transactions
Receivables Scenario:
Customer dispute / distress
Inspect correspondence to assess if balance will be paid
Inspect FS of customer/recent press reports to see if customer a going concern
Obtain customer confirmation of balance
Inspect credit policy/sales contracts to assess legal position
Trace balance back to invoice/despatch note/sales order
Inspect post year end transactions to see if payment made
Cost of Sales Numbers:
Increase in COS < increase in revenue
GPM increase
Enquire with management to establish commercial reasons why
Observe controls over requisition/ordering/receiving/payment
Inspect post year end transactions to see if relate to current year
Review other expense accounts for costs incorrectly classified
Trace PO/GRN/invoice to purchases expense
COS Scenario: Unauthorised purchases
General procedures for purchases system (bottom of page):
Observe controls over requisition/ordering/receiving/payment
Obtain list of approved suppliers and review to payables ledger to identify unauthorised suppliers to discuss with management Inspect GRN numerical sequencing and matching to PO
Observe process of invoice being agreed to GRN/PO Reconcile payables to supplier statements Trace payments back to invoice/GRN/PO and inventory
Data analytics for three-way match between invoice/GRN/PO
PAYABLES Numbers: Low compared to increase in COS Payables days decrease Payables days < credit terms
Enquire with management to establish commercial reasons why
Obtain suppliers confirmations of balances and reconcile with payables
Inspect correspondence to identify disputed amounts
Inspect supplier credit policy/purchase contracts
Inspect post year end transactions to see if relate to current year
Data analytics for three-way match between invoice/GRN/PO
Trace PO/GRN/invoice to payables balance
PAYABLES Numbers: High compared to increase in COS Payables days increase Payables days > credit terms
Enquire with management to establish commercial reasons why
Data analytics to identify all aged amounts
Obtain suppliers confirmations of balances and reconcile with payables
Inspect correspondence to assess if overdue balances will be paid
Inspect supplier credit policy/purchase contracts
Inspect post year end transactions to see if payment made
Data analytics for three-way match between invoice/GRN/PO
Trace payables balance to invoice/GRN/PO
Client Purchases System
Purchase Order (PO) sent to supplier detailing goods/services required
Segregation of requisition and ordering; authorised supplier list;
authorisation of PO
Goods received from supplier
Agree goods received to PO and quality check goods;
Goods Received Note (GRN) numbered
Purchase invoice received
Agree invoice to GRN; regular review of PO/GRN not matched by invoice; reconcile payables to supplier statements
Payment to supplier
Match payments to invoice; segregation of duties
Credit note issued for goods returned
Record and number return of goods; Procedures for obtaining credit notes
