14-25
1.
a.
b.
c.
2.
a.
b.
c.
3.
a.
b.
c.
4.
a.
Substantive test of transactions
Sales transactions are properly included in the accounts receivable
master file and are correctly summarized. (Posting and
summarization)
Reperformance
Test of control
Recorded sales returns are for returns from existing customers.
(Occurrence)
Documentation
a.
Test of control
(1)
Cash received is recorded in the cash receipts
journal. (Completeness)
(2)
Cash receipts are recorded on the correct dates. (Timing)
Observation or documentation
Substantive test of transactions
(1)
Recorded receipts are for funds actually received by the
company. (Occurrence)
(2)
Cash received is recorded in the cash receipts journal.
(Completeness)
(3)
Cash receipts are deposited at the amount received.
(Accuracy)
(4)
Cash receipts are recorded on the correct dates. (Timing)
Documentation
b.
5.
c.
a.
b.
c.
6.
b.
c.
7.
a.
b.
c.
Test of control
Existing sales transactions are recorded. (Completeness)
Documentation
Test of control
Recorded sales are for shipments actually made to existing
customers. (Occurrence)
Documentation
Substantive test of transactions
Recorded sales are for the amount of goods shipped. (Accuracy)
Documentation
14-32
Control
TransactionRelated
Audit
Objective
1.
Occurrence
Accuracy
2.
Occurrence
Accuracy
Potential Financial Statement
Misstatement if Control is Absent
Sales may be recorded for invalid or non-existent
products.
Sales may be processed based on inaccurate
price information.
Sales may be recorded for non-existent products.
Sales may be processed for existing products
using quantities ordered, even when ordered
quantities are not on hand.
3.
Occurrence
Sales may be processed for customers who are
unable to pay.
4.
Occurrence
Shipments may be made to persons making an
unauthorized credit card purchase (e.g., with a
stolen credit card).
5.
Accuracy
6.
Occurrence
Timing
Sales may be processed inaccurately (e.g.,
wrong product, wrong price, wrong quantity).
Sales may be recorded even though shipment
has not occurred.
Sales may be recorded in the wrong time period.
14-35 – ACL Problem
a.
There are 112 transactions in the month of September, 2002. The total
amount of these transactions is $127,941.13 (Filter expression is DATE1
>= ‘20020901’ AND DATE1 <= ‘20020930’; Count command; then Total
command).
b.
Type “IN” has the highest count. See the following report created using the
Summarize command:
Page ...
1
04/10/2007 12:09:18
Produced with ACL by: ACL Educational Edition - Not For Commercial Use
TYPE
AMOUNT
COUNT
AA
CN
IN
PM
TR
-533.59
-9025.02
525259.16
-45281.38
-1538.48
468880.69
1
108
588
71
4
772
c. There are 588 sales invoices (IN), totaling $525,259.16. The largest single invoice
amount is $5,549.19 and the average invoice amount is $893.30. (Filter by invoice
type = IN; then use Statistics command on the Amount column.)
d. Leaving the filter from part c intact, create a computed field with the following
expression: DUE – DATE1 and then add this column to the table view. Several of
the invoices have negative results, which means that possibly the wrong year was
used for the due date. Also, some are 90 days old, which indicates potential
collection problems.
See the following printout:, which is the result of using the Stratify command after
a filter is applied to isolate “IN” transactions greater than or equal to $300.
11-26
1.
2.
a.
b.
c.
a.
b.
c.
3.
a.
b.
c.
4.
a.
b.
c.
5.
6.
a.
b.
c.
a.
b.
c.
7.
a.
b.
c.
8.
a.
b.
c.
Error
Internal verification of invoice preparation and posting by an independent
person.
Test clerical accuracy of sales invoices.
Fraud.
The prelisting of cash receipts should be compared to the postings in the
accounts receivable master file and to the validated bank deposit slip.
Trace cash received from prelisting to cash receipts journal. Confirm
accounts receivable.
Error.
Use of prenumbered bills of lading that are periodically accounted for.
Trace a sequence of prenumbered bills of lading to recorded sales
transactions. Confirm accounts receivable at year-end.
Error.
No merchandise may leave the plant without the preparation of a
prenumbered bill of lading.
Trace credit entries in the perpetual inventory records to bills of lading
and the sales journal. Confirm accounts receivable at year-end.
Error.
Internal review and verification by an independent person.
Test accuracy of invoice classification.
Error
Online sales are supported by shipping documents and approved online
customer orders.
Trace sales journal or listing entries to supporting documents for online
sales, including sales invoices, shipping documents, sale orders, and
customer orders.
Error
Sales invoices are prenumbered, properly accounted for in the sales
journal, and a notation on the invoice is made of entry into the sales
journal.
Account for numerical sequence of invoices recorded in the sales journal,
watching for duplicates. Confirm accounts receivable at year-end.
Fraud.
All payments from customers should be in the form of a check payable to
the company. Monthly statements should be sent to all customers.
Trace from recorded sales transactions to cash receipts for those sales;
confirm accounts receivable balances at year-end.
14-30 a.
DEFICIENCY
RECOMMENDED IMPROVEMENT
1. Financial secretary exercises too much
control over collections.
To extent possible, financial secretary's
responsibilities should be confined to
record keeping.
2. Finance committee is not exercising its
assigned responsibility for collection.
Finance committee should assume a
more active supervisory role.
3. The finance committee is responsible for
the auditing function and administration
of the cash function. Moreover, the
finance committee has not performed the
auditing functions.
An audit committee should be
appointed to perform periodic auditing
procedures or engage outside auditors.
4. The head usher has sole access to cash
during the period of the count. One
person should not be left alone with the
cash until the amount has been recorded
or control established in some other way.
The number of counters should be
increased to at least two, and cash
should remain under joint surveillance
until counted and recorded so that any
discrepancies will be brought to
attention.
DEFICIENCY
RECOMMENDED IMPROVEMENT
5. The collection is vulnerable to robbery
while it is being counted and from the
church safe prior to its deposit in the
bank.
The collection should be deposited in
the bank's night depository immediately
after the count. Physical safeguards,
such as locking and bolting the door
during the period of the count, should be
instituted. Vulnerability to robbery will
also be reduced by increasing the
number of counters.
6. The head usher's count lacks usefulness
from a control standpoint because he
surrenders custody of both the cash and
the record of the count.
The financial secretary should receive a
copy of the collection report for posting
to the financial records. The head usher
should maintain a copy of the report for
use by the audit committee.
7. Contributions are not deposited intact.
There is no assurance that amounts
withheld by the financial secretary for
expenditures will be properly accounted
for.
Contributions should be deposited
intact. If it is considered necessary for
the financial secretary to make cash
expenditures, he should be provided
with a petty cash fund. The fund should
be replenished by a check based upon
a properly approved reimbursement
request and satisfactory support.
8. Members are asked to draw checks to
Members should be asked to make
"cash," thus making the checks
completely negotiable and vulnerable to
misappropriation.
checks payable to the church. At the
time of the count, ushers should stamp
the church's restrictive endorsement
(For Deposit Only) on the back of the
check.
9. No mention is made of bonding.
Key employees and members involved
in receiving and disbursing cash should
be bonded.
10. Written instructions for handling cash
collections apparently have not been
prepared.
Especially because much of the work
involved in cash collections is performed
by unpaid, untrained church members,
often on a short-term basis, detailed
written instructions should be prepared.
11. The envelope system has not been
encouraged. Control features that it
could provide have been ignored.
The envelope system should be
encouraged. Ushers should indicate on
the outside of each envelope the
amount contributed. Envelope
contributions should be reported
separately and supported by the empty
collection envelopes. Prenumbered
envelopes will permit ready identification
of the donor by authorized persons
without general loss of confidentiality.