Ass AUDIT

I, Introduction:
Every organization wishing to operate their units to be effective, the

financial statements honestly and reasonably and comply with laws and
regulations. That each unit contains the potential risks, environmental risks
from the outside, inside the main internal units. So to prevent and minimize
such risks, one of the activities increasingly indispensable for the unit is the
internal control activities, especially for units with large-scale operation
internal control has brought about significant results.
The system of internal control is done simultaneously in different stages.
The sales cycle - cash receipts is an important processes. It determines the
revenue of a business. That why it always potential big risk. To clarify
operation of internal control the sales cycle. We will consider an example of
a store selling women’s clothing.
II, Answer five questions:
A, what are the objectives of internal control?
1. To ensure the orderly and efficient conduct of business in respect of

systems being in place and fully implemented. Controls mean that business
processes and transactions take place without disruption with less risk or
disturbance and this, in turn and adds value
2. To safeguard the assets of the business. Assets include tangibles and

intangibles, and controls are necessary to ensure they are optimally utilized
and protected from misuse, fraud, misappropriation or theft.
3. To prevent and detect fraud. Controls are necessary to show up any

operational or financial disagreements that might be the result of theft or
fraud. This might include off-balance sheet financing or the use of
unauthorized accounting policies, inventory controls, use of company
property and similar.
4. To ensure the completeness and accuracy of accounting records.

Ensuring that all accounting transactions are fully and accurately recorded,
that assets and liabilities are correctly identified and valued, and that all
costs and revenues can be fully accounted for.
5. To ensure the timely preparation of financial information which applies to

statutory reporting (of year end accounts, for example) and also
management accounts, if appropriate, for the facilitation of effective
management decision-making.
B,Identify key control procedures for sales and cash receipts?
-Each sales staff has her own sales book with pre-numbered, three-copy,
multi-colour sales slips. Only a central cash register is used.
-The cash register is located at the store entrance to control theft of

clothes.
Sales staff prepare sales invoices in three copies. The original and the
second copy are given to the cashier. The third copy is retained by the
sales staff in the sale book. When the sale is for cash the customer pays
the sales staff, who marks all three copies “paid” and presents the money
to the cashier with the invoice copies.
-All clothing is put into boxes or packages by the supervisor after

comparing the clothing with the description on the invoice and the price on
the sales tag. She also rechecks the sales staff’s calculation. Any
corrections are approved by the sales staff. The sales staff changes her
sales book at that time.
-A credit sale is approved by the supervisor from an approved credit list

after the sales staff prepares the three-part invoice.
- The second copy of the invoice, which has been validated by the cash
register, is given to the customer.
- At the end of the day, the supervisor reviews the sales and cash and
compares the totals with the cash register tape. The supervisor deposits
the cash at the end of each day in the bank account. The cashier’s copies
of the invoices are sent to the accounts receivable accountant along with a
summary of the day’s receipts.
C, For each sales transaction-related audit objective, identify one or more

existing controls
As stated in the case, Lady’s Fashion has its own billing rather than credit
card mechanism.
In its sales transaction audit objectives, some existing controls are:
Use of sales book: Here is this store, salesclerks are provided with
individual sales book but a single cash register, operated by store
supervisor is used here. The pre-numbered, three-copy, multi- colour slips
are the first source of control in sales transaction objectives. The
salesclerks are provided with their own sales book. Here the entries
regarding the sales are stored.
The supervisor enters the record in the sales in the cash register as a cash
or credit sale.
Supervisor tally the cash register at the end of the day for verifying sales.
Clerks summarized the sales in the daily summary form. Accountant
receives the along with summary form from clerks and feed the information
is computer. The computer generates the accounting summary.
D, For each cash receipts transaction-related audit objective, identify one

or more existing controls
In case of a cash transaction, the salesclerk mark the invoice copies as

paid and money is presented to the cashier which the set of invoice copies.
Supervisor checks the sales tag and correct any possible mistake in the
calculation made by the salesclerk followed by correction in sales book of
clerks.
The supervisor enters the record in the sales in the cash register as a cash
or credit sale. At the end of the day, the supervisor reviews the sales and
cash and compares the totals with the cash register tape. The supervisor
deposits the cash at the end of each day in the bank account. The cashier’s
copies of the invoices are sent to the accounts receivable accountant along
with a summary of the day’s receipts.
E, Identify weaknesses of internal control for sales and cash receipts.
1. Separation of duties.
The task for collecting and receiving payment is residing at two

separate people. For the cash sales payment, the payment can be
made straight to the cashier while payment via cheque and sale
credit sales, the payment are made through the sales clerk. The task
should be done to one person only as by centralising the collection of
payment can be reconciled and tracked easily.
2. Credit limit check
Currently, credit limit check for credit sale was done by the cashier
after receiving the sales invoice for the sales clerk. The credit limit
check should be done by the sales clerk before he/she issue a sales
invoice to the cashier. This can save the buying process time.
3. Duplication of task
As in cash receipt workflow, we can see that the task of reviewing

remittance advices and cheque are made by both sales department
supervisor and account department supervisor. This task can be
done only by the account department supervisor. This is because the
account department supervisor will review all the cheques for
payment of past due account while the sale supervisor only review it
without having any added value to the reviewing function. This can
shorten the process and can avoid misunderstanding on reviewing
both documents.
III, CONCLUSION
Internal control is a process by the management, board and staff in the unit
perform and dominate, so the internal control system offers many
subjective factors of people should only provide grant a reasonable
assurance, not absolute guarantee that the objectives of the unit is done.
The systems of internal control the sales cycle are also potential risks, but
mainly due to risk bringing subjective factors within the enterprise.

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I, Introduction:

Every organization wishing to operate their units to be effective, the

A, what are the objectives of internal control?

1. To ensure the orderly and efficient conduct of business in respect of

2. To safeguard the assets of the business. Assets include tangibles and

3. To prevent and detect fraud. Controls are necessary to show up any

4. To ensure the completeness and accuracy of accounting records.

5. To ensure the timely preparation of financial information which applies to

B,Identify key control procedures for sales and cash receipts?

-The cash register is located at the store entrance to control theft of

-All clothing is put into boxes or packages by the supervisor after

-A credit sale is approved by the supervisor from an approved credit list

C, For each sales transaction-related audit objective, identify one or more

D, For each cash receipts transaction-related audit objective, identify one

In case of a cash transaction, the salesclerk mark the invoice copies as

E, Identify weaknesses of internal control for sales and cash receipts.

The task for collecting and receiving payment is residing at two

2. Credit limit check

As in cash receipt workflow, we can see that the task of reviewing

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