Apollo Shoes - Internal Controls Solution

Topics: Invoice, Accounts receivable, Accounts payable Pages: 13 (4097 words) Published: November 15, 2009
Apollo Shoes, Inc.
Internal Control Questionnaire Sales Transaction Processing December 31, 2007

Objectives and QuestionsYes, No, N/A Comments
1.Is the credit department independent of the sales department?Yes. Credit manager in Treasurer's office 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.No available information, apparently not applicable Existence Objective:

3.Is access to sales invoice blanks restricted?Yes. Kept in locked closet 4.Are prenumbered bills of lading or other shipping documents prepared or completed in the shipping department?Yes. Shipping department Completeness Objective:

5.Are sales invoice blanks prenumbered?Yes
6.Is the sequence checked for missing invoices?No available information 7.Is the shipping document numerical sequence checked for missing bills of lading numbers?No available information Valuation Objective:

8.Are all credit sales approved by the credit department prior to shipment?Yes. Credit manager file 9.Are sales prices and terms based on approved standards?Yes. Approved price file 10.Are returned sales credits and other credits supported by documentation as to receipt, condition, and quantity and approved by a responsible officer?No available information Occurrence Objective:

11.Are shipped quantities compared to invoice quantities?Yes. Shipping department clerk 12.Are sales invoices checked for error in quantities, prices, extensions and footing, and freight allowances and checked with customers' orders?Yes. Accounts receivable clerk 13.Is there an overall check for errors in arithmetic accuracy of period sales data by a statistical or product-line analysis?Yes. Marketing vice president 14.Are periodic sales data reported directly to general ledger accounting independent of accounts receivable accounting?No. Information comes from accounts receivable accounting department Presentation and Disclosure Objective:

15.Does the accounting manual contain instruction for classifying sales?Yes. 16.Are summary journal entries approved before posting?Yes..General ledger supervisor. (procedure manual) 17.Does the accounting manual contain instructions to date sales invoices on the shipment date?Yes..General ledger supervisor. (procedure manual)

Apollo Shoes, Inc.
Apollo Revenue Cycle Flowchart
December 31, 2007

Apollo Shoes, Inc.
Sales Transaction Processing Bridge Working Paper
December 31, 2007

Strength/Weakness Audit Implication Audit Program
S-1Credit approval on sales order.Credit authorization reduces risk of bad debt loss and helps check on validity of customer identification. Select a sample of recorded sales in-voices, and look for credit manager signature on attached sales order. Make note of missing sales orders, ones not approved and compare to customers' accounts receivable for evidence of payment in advance. Note correspondence of customer name on papers.

S-2Unit prices are taken from an authorized list. (Later personnel recalculate and check the invoice arithmetic.) Prices are in accordance with company policy, minimizing disputes. (Invoices are mathematically accurate.) Using the S-1 sample of sales invoices, vouch prices used to the price list. Recalculate the math.

S-3Sales are not recorded until goods are shipped. Invoices are checked for correct product descriptions (by accounts receivable personnel). Cutoff will be proper and sales will not be recorded too early. Sales will describe products accurately for later inventory and sales classification accounting. Using the S-1 sample of sales invoices, compare the recording date to the shipment date on attached bill of lading and invoice Copy 4. Compare ship date to customer order date. Compare the product...
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