Internal Controls

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Internal Control Questionnaire—Sales Transaction Processing

Assertions and QuestionsYes, No, N/A
Comments
Occurrence assertion:
1.Is the credit department independent of the sales department?YesThe Treasurer Department handles credit sales.

2.Are sales of the following types controlled by the same procedures described below? Sales to employees, COD sales, disposals of property, cash sales, and scrap sales.NoAdditional details are necessary to determine the sales types. Each of the sales type will have the same process with the exception of sales to employees.

3.Is access to sales invoice blanks restricted?YesThe documentation pertaining to invoices blanks is kept in a filing cabinet with a lock for security. This cabinet is located in the billing department.

4.Are pre-numbered bills of lading or other shipping documents prepared or completed in the shipping department?YesThe bill of lading process and completion takes place in the shipping department. A copy is attached to the shipment while an additional copy is delivered to the customer. Completeness assertion:

5.Are sales invoice blanks pre-numbered?YesThe blank invoices will be pre-numbered by the billing clerk
6.Is the sequence checked for missing invoices?NoLack of documentation does not state any missing invoices.
7.Is the shipping document numerical sequence checked for missing bills of lading numbers?NoLack of documentation does not state any missing bills of lading.

Accuracy assertion:
8.Are all credit sales approved by the credit department prior to shipment?YesThe credit manager is in charge of keying the data into the computer software. The software reviews the data to determine if credit is extended to the customer or declined.

9.Are sales prices and terms based on approved standards?YesThe billing clerk prepares the terms associated with the price list prior to approval.
10.Are returned sales credits and other credits supported by documentation as to receipt, condition, and quantity, and approved by a responsible officer?NoMissing documentation in relation to returned sales credits. This includes missing supporting documents regarding receipts and other quantity of items under the approval of an officer.

11.Are shipped quantities compared to invoice quantities?YesThe shipping clerk is responsible for comparing the invoice and quantity twice per shipment. This process also includes making sure the items are in the correct shipping container.

12.Are sales invoices checked for error in quantities, prices, extensions and footing, and freight allowances, and checked with customers’ orders?YesThe AR clerk manages sales invoices checking for errors pertaining to quantities, prices, extensions, and freight allowances. These processes can be located in the organizations accounting manual.

13.Is there an overall check on arithmetic accuracy of period sales data by a statistical or product-line analysis?YesThe VP of Marketing is in charge of checking arithmetic accuracy and data by a statistical or product-line analysis.

14.Are periodic sales data reported directly to general ledger accounting independent of accounts receivable accounting?NoThe process is to forward periodic sales data to the AP department. Classification objective:

15.Does the accounting manual contain instructions for classifying sales?YesThe accounting manual contains the process on how to classify sales.

Cutoff objective:
16.Does the accounting manual contain instructions to date sales invoices on the shipment date?YesThe manual states the general ledger supervisor will approve this process.

Strengths
1. In dealing with sales and credit approval the departments are separate from each other. 2. The sales invoices are pre-numbered and the invoice blanks are restricted in a locked cabinet. 3. Customer orders are attached if written one was received. 4. All pricing for sales is...
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