SALES SYSTEM

Assertion Control objective Control Test of control

1 Occurence & To ensure that Segregation of duties Observe and evaluate

Existence one person is not whether proper
responsible segregation of duties
or taking orders, is operating
recording sales
and receiving
payment

2 Occurence & To ensure that I.Sales are only recorded if For a sample of sales
Existence recorded sales there is an approved sales Invoices ensure there
transactions order form and shipping/ Is a related sees order
represent goods dispatch documentation form that has been
or services authorised and
provided II.Accounting for numerical shipping
sequences of invoices documentation.

III.Monthly customer Examine application

statements sent out and controls for
customer queries and authorisation.
complaints handled
independently Review and test
entity's procedures for
accounting for
numerical sequences
of voices.
Review entity's
procedures for sending
out monthly
statements and
dealing with customer
queries & Complaints

3 Occurence & To ensure that + Authorisation of credit * Review. entity's

Existence goods and terms to customers (senior procedures for
services are only staff authorisation, granting credit to
supplied to references/credit checks customers.
customers with for new customers, regular
good credit review of credit limits) + Examine a sample of
ratings. sales orders for
+ Authorisation by senior evidence
staff required for changes of proper credit
in approval by the
other customer data such appropriate Sr. staff
as address etc member

+ Orders not accepted + Examine application

unless credit limits controls for credit
reviewed first limits.
 + Review all new
customer files to
ensure satisfactory
credit references have
been obtained.

4 Occurence & To ensure that Authorised price lists and Verify that price | lists
Existence goods and specified terms of trade in and terms of trade are
services are place. properly
provided at documented,authorise
authorised d & communicated.
Prices and on Examine application
authorised items control for authorised
prices & terms

5 Completenes To ensure that all Accounting for numerical Review and test
s revenue relating sequences of invoices. entity's procedures, for
to goods accounting for
dispatched is numerical sequences
recorded of invoices.

6 Completenes To ensure that all (i) Shipping/dispatch (i) For a sample of

s goods and documentation is matched shipping/dispatch
services sold are to sales invoices. documents, inspect to
correctly ensure each has
invoiced ii) Sales invoices are been matched to a
reconciled to the daily related sales invoice
sales that was subsequently
report. recorded.

iii)An open-order file is (ii)Review a sample of

maintained and reviewed reconciliations
regularly performed.

(iii)Inspect the
open-order file for
unfilled
orders.

7 Accuracy To ensure that all Sales invoices and Review supporting

sales and matching documents documents for a
adjustments are required for all entries and sample of sales entries
correctly date & reference for the to ensure they contain
journalised, entry are written on each the written details that
summarised and document indicate they were
posted to the referred to when
correct accounts. entered

8 Cut-off To ensure that (i) All shipping (i) Compare dates on

transactions documentation is sales invoices with
have been forwarded to the invoicing dates of corresponding
recorded in the section on a daily basis shipping
 correct documentation
period. (ii) Daily invoicing of goods
shipped. ii) Compare dates on
sales invoices with
dates recorded in
sales ledger

9 Classification To ensure that all ()) Chart of accounts in (i) inspect any
of occurrence transactions are place which is regularly documentary evidence
properly reviewed and of review (such as
classified in updated emails requesting
accounts update to chart of
(ii) Codes in place for accounts as a result of
different types of products review
or services
(li) Test application
controls for proper
codes

PURCHASE SYSTEM

Assertion Control objective Control Test of control

1 Occurrence & To ensure that (i) Authorisation i)Inspect policies

Existence recorded purchases procedures and and procedures in
represent goods and policies in place for place.
services received. ordering goods and
services (ii) Observe and
evaluate
(ii) Segregation of segregation of
duties duties.

(iii)Purchase orders (ill) Examine a

raised for each sample of
purchase and purchase orders to
authorised by ensure they have
appropriate senior been appropriately
personnel authorised.

(iv)Approved purchase Review the

order for each receipt delegated list of
of goods authority for
purchases.
(v) Staff receiving
goods check them to {iv) For a sample
the purchase order of GRNs, ensure
there is arelated
(vi)Stores clerks sign purchase order
for goods received that has been
properly approved.
(vii)Purchase orders
and GRNs are (v)Observe
 matched with the receipts of goods
‘suppliers’ invoices by staff to confirm
whether the check
is done.

(vi) Inspect a
sample to confirm
whether stores
staff undertake this
check.

(vil) Examine
supporting
documentation to
ensure it has been
matched for a
sample of invoices.

2 Completeness To ensure that all i) Purchase orders and (i) For a sample of
purchase transactions GRNs are matched purchase orders in
that occurred have with the suppliers the year ensure
been invoices each has been
recorded ji) Periodic accounting matched to a
for pre-numbered related invoice that
GRNs and purchase was subsequently
orders recorded.

ii) Independent check (ii) Review entity's

of amount recorded in procedures for
the purchase accounting for
journal pre-numbered
documents.

(iii)Examine
application
controls.

Examine
documentation for
evidence of this
check.

3 Rights & To ensure that Purchase orders and Examine

Obligation recorded purchases GRNs are matched supporting
represent the liabilities with the suppliers’ documentation to
of the invoices ensure it has been
entity matched for a
sample of invoices

4 Accuracy, To ensure that {i) Purchase orders (i) Examine

classification purchase transactions and GRNs are supporting
 and valuation are correctly recorded matched with the documentation for
in the suppliers’ a sample of
accounting system invoices invoices.

(ii) Mathematical (ii)Review a

accuracy of the sample of invoices
supplier's invoice is for evidence the
verified accuracy has been
verified (eg
iii)Amount posted to signature or
general ledger is initials)
reconciled to the and re perform the
purchases ledger check.

{iv)Chart of accounts (iii)Review

in place reconciliations for
evidence of this
check.

(iv)Review
purchases journal
and general ledger
for
reasonableness.

5 Cut off To ensure that {i) All goods received (i) Compare dates
purchase transactions réports forwarded to on reports to dates
are recorded in the accounts payable on relevant
correct department daily vouchers
accounting period
(i) Procedures in place (ii) Compare dates
that require recording on vouchers with
of purchases as soon dates they were
as possible after recorded in
goods/services the purchases
received journal

INVENTORY SYSTEM

Assertion Control Control Test of control

objective

1 Occurrence & Existence To ensure that (i)Pre-numberd fi) Review

all inventory documentation documentation
movements are (GDNs and in use
authorised and GRNs) in use
recorded (il)Reconciliatio (1) Review 2
 ns of inventory sample of
records with reconciliation to
general ledger confirm they are
ii) Segregation performed and
of duties reviewed by Sr

iii)Observe and
evaluate proper
segregation of
duties

2 Occurrence & Existence To ensure that “(Physical (i) Review

inventory safeguards to security
included on the ensure systems in
statement of inventory is not place
financial stolen (ii)_ Review
position policies and
physically procedures in
exists place and
(ii) Separate discuss them
responsibilities with relevant
for maintenance staff
of records and (ili) Review
custodianship procedures for
counting
(ii) Inventory inventory and
counted attend inventory
regularly count

3 Completeness To ensure that (i) Procedures {i) Review

all purchases in place to entity's
and sales of include procedures
inventory have inventory held relating to
been at third parties consignment
recorded in the and exclude inventory
accounting inventory held
system on consignment (ii) Review
for third parties reconciliations
performed and
(ii) whether
Reconciliations reviewed by
of accounting an independent
records with person
physical
inventory

4 Rights & Obligation To ensure that Procedures in Review entity's

inventory place to include procedures
records only inventory held relating to
include items at third parties consignment
that belong to and inventory
 the entity exclude
inventory held
on consignment
for third parties

5 Accuracy, To ensure that Periodic or Review and test

classification,valuation inventory annual entity's
quantities have comparison of procedures for
been accurately inventory with taking physical
determined amounts shown inventory
in perpetual
inventory
records

6 Accuracy, To,ensure that ()_ Standard (i) Review and

classification,valuation inventory is costs reviewed test entity's
properly stated by management procedures for
at the lower of (ii) Review of developing
cost and net cost standard costs
realisable accumulation (li) Inspect
value and variance variance reports
reports produced
(ii) Discuss with
(ii) Inventory managers how
managers this is done and
review inventory observe
regularly to procedure
identity
slow-moving,
obsolete and
excess
inventory

7 Cut off To ensure that (i) and (ii)

all purchases i)All dispatch Inspect
and sales of documents documentation
inventory are processed daily to confirm daily
recorded to record the processing
in the correct dispatch, iii)Review
accounting of finished reconciliations
period goods performed

i) All goods
inwards reports
processed daily
to record the
receipt of
inventory

(iii)
Reconciliations
 of inventory
records with
general ledger

8 Presentation & Disclosure Orders for Review entity's

materials and procedures and
To ensure that production data documentation
inventory forms used to used to classify
process inventory
transactions goods through
and balances manufacturing
are properly
identified and
classified

in the financial
statements

9 Presentation & Disclosure To ensure that Approval by Review entity's

disclosures Finance working papers
relating to Director for evidence of
classification review
and
valuation are
sufficient

REVENUE & CAPITAL EXPENDITURE

* Itis important that an entity has controls in

place to ensure that capital and revenue
expenditure are accounted for correctly as
errors will result in the misstatement o1
profit and net assets.

Management may have an incentive to

misclassify expenditure in order to
manipulate profit or for tax purposes.

Costs which are susceptible to incorrect

accounting treatment are repairs and
maintenance, research and development,
and website/software costs.
 Assertion Control Control Test of
objectives control
1 Authorization To ensure (i) Orders for (i) Review
that capital items policies and
expenditure should be procedures
is properly authorised in place.
authorised by
appropriate (ii)Examine a
levels of sample of
management orders for
. appropriate
authorisation
(ii) Order .
should be
requisitioned (iii)Inspect
on invoices to
appropriate verify the
(different to invoice has
revenue) been
documentati appropriately
on. approved.

{iii) Invoices (iv)Inspect

should be invoices to
approved by verify the
the person invoice has
who the correct
authorised general
the order. ledger code
marked on
{iv) Invoices it
should be
marked with
the
appropriate
general
ledger code.

2 Completeness To ensure (i) Capital Review

that all items should reconciliation
non-current be written up s to ensure
assets are in the they are
correctly non-current regularly
recorded in asset carried out,
the register. reviewed by
accounting a more
system (ii) The senior
non-current person, and
asset that all
register discrepancie
should be s are
 reconciled followed up
regularly to and resolved
on a timely
the general basis.
ledger and
any
differences
should be
investigated
and resolved
promptly.

3 Classification To ensure As for As for

that all purchase purchase
expenditure system system
is classified
correctly in
the financial
statements
as capital or
revenue
expenditure