TopicD3TransactionCycles

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1、It is far better, and easier in the long run, if you can relate general principles to each audit area rather than learning long lists of tests. This is partly because long lists of test are almost impossible to remember clearly and accurately and partly because the examiner might give you a slightly

2、 unusual situation which will require the approach to be modified slightly.Control objectives for all systems:Only authorized transactions are promptly recorded at the correct amount in the appropriate accounts in the proper accounting period, that access to assets is only in accordance with proper

3、authorization and that recorded assets are compared with existing assets.Detailed control activities are often similar across sales, purchases and other areas and include for example:Sequential numberingBatch and control totalsControl accountsAuthorizationREVENUE CYCLEControl objectives（1）To ensure

4、that all sales revenues are included in the accounting records（2）to ensure that sales revenues included in the records are accurately stated（3）to minimise losses through bad debts and/or returnsSegregation of duties（1）Accepting customer orders（2）Despatch department（3）Invoicing（4）Receiving and record

5、ing cashAuthorisation and approval controls-examples（1）Check orders against credit limits（2）Orders should be authorised in writing（3）Sales invoices should be authorised in writing（4）Writing off bad debts should be authorised in writing.Physical controls-examples（1）Record orders on pre-numbered docum

6、ents（2）No goods to be despatched without a despatch note（3）Goods returned should be used to prepare credit notes.Arithmetical controls-examples（1）Check calculations on invoices（2）Send statements to customers regularly（3）Identify overdue debts using age analysis（4）Chase customers for overdue debts.Se

7、gregation controls-examples（1）Credit notes should be authorised by someone unconnected with despatch or sales ledger functions（2）Sales invoices and credit notes should be checked （prices, calculations etc） by a person other than the one preparing the invoice（3）Sales ledger personnel should be indepe

8、ndent of despatch and cash receipt functions.Organisation controls-examples（1）Sequence checks on pre-numbered documents（2）Reconciliation of control account.Items to testCustomers vetted before credit is givenOrders vetted against credit limits Goods despatched only against approved customer ordersAl

9、l despatches and returns should be invoiced and recorded correctly （sales orders linked to despatch notes, linked to sales invoices; returns checked for quality and logged）Invoices/credit notes accurately prepared form price lists, customer trading terms etcInvoices prepared form despatch notes only

10、Credit notes, bad debts and adjustments backed by appropriate documentation and authorisationSales transactions posted completely and accurately to ledger accountsReconciliation of control accountChasing of overdue balancesSegregation of duties.Analytical review proceduresFluctuations in sales level

11、sCut-off problemsCheck disclosure （eg, segmental information）.Note that one approach to designing tests of control is to list the documents involved in the system, and think of tests for each document. This is illustrated below for a sales system.Test for evidence of approval.Test for evidence of a

12、sequence check.Test for:（1）Evidence that a GRN is raised for all sales returns accepted.（2）Evidence of a sequence check.Test for:（1）Serial numbering.（2）Evidence of a sequence check.（3）Evidence of matching sales invoices to despatch notes and customer orders.（4）Correct accounting.Test for:（1）Evidence

13、 of approval and matching to GRN.（2）Correct accounting.Test for evidence of authorisation of adjustments to sales ledgerTest for:（1）Evidence of review of reconciliation to sales ledger.（2）Evidence of authorisation of adjustments to sales ledger control account.The point made in the previous chapter

14、applies here with equal force: though detailed, these descriptions of accounting systems and controls are of great examination importance.1.IntroductionThis chapter covers controls over payroll, and the assets of cash, inventory and non-current assets which must be safeguarded and used properly for

15、company purposes.2.PayrollControl objectivesTo ensure that payments made represent value received for authorised work to ensure that payroll costs are completely and accurately recorded in the financial statements Segregation controls examplesWages/salaries department should be separate from receipt

16、s or payments functions.Duties of wages staff should be rotated during the year.The employee making up the pay packets should be different from the employee preparing the payroll.Periodic surprise attendance at payouts.Physical controls examplesSupervision of clock cards and timing devicesControl ov

17、er unclaimed wagesAuthorisation and approval controls examplesWritten authorisation to employ or dismiss any employee, or to change rates of payAuthorisation of overtimeAn independent official should check the payroll and sign itEmployees should sign for their wagesWages cheque should carry two sign

18、atures.Arithmetical and accounting controls examplesA sample of calculations should be checkedControl accounts should be maintainedPersonnel controls - exampleA wages supervisor should be appointedManagement controls - exampleOverall checks to highlight major discrepancies （eg, check against budget）

19、Items to testtime records properly maintained and authorisedstarters, leavers and changes in rates properly authorised by a department independent of the payroll departmentovertime, bonuses and commissions properly authorised and checkeddeductions properly calculated and recordedchanges to tax rates

20、, allowances properly authorised and correctly implementedcorrect amounts paid to tax authorities and other external organisationsappropriate amounts recovered from external organisationstotal payroll authorisedadequate security over cash transmissionspayroll totals correctly posted to ledger accoun

21、tssegregation of duties.3.Cash systemTo ensure that all cash receipts are properly collected, recorded and banked to ensure that payments made to suppliers are in respect of authorised invoices onlyto ensure that amounts charged to the band statement are authorisedto ensure that receipts and payment

22、s are recorded accurately and completely in the accounting records.Controls over cash receipts post.Controls over cash collected by the sales force.Controls over cash sales.Controls over banking.Controls over cheque payments.Band reconciliations.Controls over petty cash.Items to testproper controls

23、over receipts in the form of till receipts, other cash takings, cheques and credit cardsprompt banding of notes, coins, cheques and credit card vouchersreconciliation of cash receipts（eg, to till rolls）Proper controls over opening of mail, including log of cheques receivedReconciliation of log to ba

24、nking recordsAgreement of receipts to remittance advicesAll receipts properly recorded and posted to correct ledger accountsReconciliation of receivables control accountSecure storage of unused cheques, etcall cheques accurately prepared on the basis of approved documentation authorised limits for c

25、heque signatoriesBank transfers properly authorised against supporting documentation direct debits and standing orders properly authorised and monitoredAll payments properly recorded and posted to correct ledger accountsreconciliation of payables control accountSegregation of duties Regular bank rec

26、onciliations.4.Other systemsInventoriesControl objectivesto ensure that inventory consumption and inventory transfers are correctly and completely recordedto ensure that inventory figures in the income statement and balance sheet are correctly statedTo ensure that physical amounts of inventory held

27、reconcile to book quantitiesTo minimise loss and wastage of inventory.Items to testInventory requisitions are based on authorised reorder levelssequentially numbered goods received notesgoods in are properly inspectedGoods rejected are properly recorded and credit notes chasedAll movements of invent

28、ory properly recordedInventory records reconciled to physical quantitiesIssues to work in progress properly and consistently valuedAll inventory issues correctly authorisedAdequate security in holding inventories areas Segregation of duties.Non-current assetsControl objectivesto ensure that non-curr

29、ent assets are correctly recorded, adequately secured and properly maintainedTo ensure that acquisitions and disposals of non-current assets are properly authorisedTo ensure that acquisitions and disposals of non-current assets are for the most favourable price possible.Items to testall acquisitions

30、 properly authorisedall acquisitions accurately recordeddepreciation calculations should be properly authorised, consistent and appropriateall assets safeguardedall assets logged in registerregular reconciliation of physical assets to registerall title deeds securely storedall disposals properly aut

31、horiseddisposals at arms length to ensure best price all disposals properly recordedsegregation of duties.InvestmentsControl objectivesto ensure secure title to the investmentto ensure that all income accruing is received.Items to testdefined authorisation system for acquisitions and disposalsall ac

32、quisitions and disposals correctly recordedall investment income monitored and chasedcontrol accounts maintained and regularly reconciledsegregation of duties.History Exam Question Analysis（Q1/J）1 （a）State the control objectives for the ordering, despatch and invoicing of goods. （5 marks）（b）Atlantis

33、 Standard Goods （ASG） Ltd has a year end of 30 June . ASG is a retailer of kitchen appliances such as washing machines, fridges and microwaves. All sales are made via the companys Internet site with dispatch and delivery of goods to the customers house made using ASGs vehicles. Appliances are purcha

34、sed from many different manufacturers.The process of making a sale is as follows:（1）Potential customers visit ASGs website and select the kitchen appliance that they require. The website ordering system accesses the stock specification file to obtain details of products ASG sells.（2）When the custome

35、r chooses an appliance, order information including price, item and quantity required are stored in the orders pending file.（3）Online authorisation of credit card details is obtained from the customers credit card company automatically by ASGs computer systems.（4）Following authorisation, the sales a

36、mount is transferred to the computerised sales day book. At the end of each day the total from this ledger is transferred to the nominal ledger.（5）Reimbursement of the sales amount is obtained from each credit card company monthly, less the appropriate commission charged by the credit card company.（

37、6）Following authorisation of the credit card, order details are transferred to a goods awaiting despatch file and allocated a unique order reference code. Order details are automatically transferred to the dispatch departments computer system.（7）In the despatch department, goods are obtained from th

38、e physical stock, placed on ASG vehicles and the computerised stock system updated. Order information is downloaded on a hand held computer with a writable screen.（8）On delivery, the customer signs for the goods on the hand held computer. On return to ASGs warehouse, images of the customer signature

39、 are uploaded to the orders file which is then flagged as order complete.This years audit planning documentation states that a substantive approach will be taken on the audit.Required:Tabulate the audit tests you should carry out on the sales and despatch system, explaining the reason for each test.

40、 （15 marks） （20 marks）答疑编号10403101：针对该题提问1 （a）Control objectivesOrdering of goods Goods are only supplied to authorised customers Orders are recorded correctly regarding price, quantity, item and customer detailsDespatch and invoicing of goods Orders are despatched to the correct customer All despat

41、ches are correctly recorded Despatches only relate to goods ordered and paid for by customers Invoices raised relate to goods supplied by the company（b）Audit tests on sales and despatch systemAudit testReason for testUsing test data if necessary, access ASGs website site and input order details for

42、specific goods. Trace those order details to the orders pending file.Ensure that order details are completely and accurately recorded by the website software.Ensure that details recorded agree to those input.For a sample of items in the orders pending file, agree to the orders awaiting despatch file

43、, ensuring that appliance details and quantities are the same.To ensure that details from the website software are completely and accurately transferred to the orders awaiting despatch file. agree sales details for that customer to the monthly reimbursement from the credit card company, checking amo

44、unt received is the product price less the appropriate commission charged by the credit card company.To confirm that amounts are received for each appliance sold, and therefore that monies received are complete and accurate. agree the sales amount to the sales ledger file.To confirm that the amount

45、of sales is not understated or overstated in the ledger, nominal ledger or financial statements.Review goods awaiting despatch file for old items and inquire as to why those items are still on file.To ensure that reasons for orders not being processed are being obtained. A large number of old items

46、may also indicate problems with the credit card authorisation systems which again will need to be investigated.For a sample of days, cast the sales day book and agree the total sales to the nominal ledger accounts for that day.To check the numerical accuracy of the day book and the accuracy of posti

47、ng to the nominal ledger file.For a sample of items in the goods awaiting despatch file, agree to the despatch information held on the despatch department computer.To confirm that order details are completely and accurately transferred to the despatch department.For a sample of items on the despatch

48、 department computer, agree back to the goods awaiting dispatch file ensuring details of product, quantity and customer agree.To ensure that the despatch information is accurate and that the despatch record itself relates to a valid sale. agree to the stock records confirming that the correct applia

49、nce record was updated.Ensures that the stock system correctly records the appliance ordered and that the stock system remains accurate. check customer signature is on file agreeing receipt of goods.To confirm that evidence is available for receipt of goods confirming that goods have been delivered.

50、For a sample of items on the despatch department computer, review to see that evidence of delivery to customer is available. Investigate records where no delivery information is available obtaining reasons for this.To ensure that goods have been received and that procedures for investigating non-des

51、patch or receipt are working.Review the despatch department computer files for items not flagged order complete. Investigate and obtain reasons for these items.To ensure that the despatch process is working correctly and that incomplete items are being investigated.Note to candidates: The focus of t

52、he answer should be on substantive tests. Compliance tests are allowable where they relate to the system described.（Q3/D）3 （a）Errors and misappropriationsErrors and misappropriations that may occur if purchases and capital expenditure are not properly controlled include:（i）Purchases for goods and ca

53、pital items the company cannot use resulting in wasted resources and operational difficulties.（ii）Not obtaining the best prices available.（iii）Purchases for goods and capital items for the personal use of staff （i.e., misappropriation）.（iv）Incorrect recording and classification of purchases and capi

54、tal items.（v）Non-payment for, or overpayment in respect of, purchases and capital items.（vi）Payment for purchases and capital items not received due to suppliers issuing fictitious invoices.（vii）Purchase of goods and capital items from suppliers with whom internal staff collude to pay inflated price

55、s （segregation ofduties is necessary to prevent this）.（b）Report to management（i）Weakness and consequences: The overall structure of the system is complex, resulting in wasted management time in classifying purchases and capital items.Recommendation: That the systems should be simplified to avoid man

56、agement time being spent on what are essentially clerical duties. The budget setting process should be more realistic to avoid the need to classify capital items as purchases.（ii） Weakness and consequences: There is an out of date ordering system and an informal method of inputting changes. This res

57、ults in wasted time in correcting orders produced automatically.Recommendation: That the system be updated . the time spent making adjustments is almost certainly greater than the time it would take to update the system.（iii）Weakness and consequences: Buyers. consortium system and changes to orders:

58、 changes to orders are made by the production controller.s junior managers and the buyers. consortium system can only be used by them. This represents a lack of segregation of duties; those with access to the assets （those involved in production） should not also be able to execute the transaction （w

59、hich should be done by the buying department）. Whilst collusion with the buyers. Consortium seems unlikely, it is possible that goods the company does not need at all could be purchased.Recommendation: That the buying department take over the responsibility for dealing with the buyers. consortium an

60、d that staff operating the system are properly trained in its use.（iv）Weakness and consequences: The buyers. consortium system is taking up a large amount of system space and may be causing problems with other systems.Recommendation: That additional space be made to accommodate the system and that t

61、he software is investigated by systems engineers to establish the optimum technical solution.（v）Weakness and consequences: Only part of the buying takes place using the consortium which may be inefficient.Recommendation: That a review of the effectiveness of the use of the consortium be undertaken t

62、o establish whether to move more purchasing to the system.（vi）Weakness and consequences: The systems for budgeting and authorising capital expenditure and purchases arestructurally weak as staff appear to find it necessary to circumvent the rules in order to do their jobs; the systems are also operating inefficiently as unauthorised capital expenditure is regularly incurred. It appears on the face of it that the structural problems are giving rise to the operational difficulties, although the operational d