Items 1-9 are selected questions of the type generally found in internal control questionnaires used by auditors to obtain an understanding of internal controls in the sales and collection cycle. In using the questionnaire for a client a "yes" response to a question indicates a possible internal control, whereas a "o" indicates a potential deficiency.
1. Are sales invoices independently compared with customers' orders for prices, quantities, extensions and footings?
2. Are sales orders, invoices, and credit memoranda issued and filed in numerical sequence and are the sequences accounted for periodically?
3. Are the selling and cash register functions independent of the cash receipts, shipping, delivery and billing functions?
4. Are sales generated though the company's Web site automatically recorded in the sales system?
5. Are all C.O.D., scrap, equipment, and cash sales accounted for in the same manner as charge sales and is the record keeping independent of the collection procedure.
6. Is the collection function independent of and does it constitute a check on billing and recording sales?
7. Are the accounts receivable master files balanced regularly to control accounts by an employee independent of billing functions?
8. Are cash receipts recorded by persons independent of the mail-opening and receipts listing functions?
9. Are receipts deposited intact daily on a timely basis?
Required.
a) For each of the preceding questions, state the transaction-related audit objectives being fulfilled if the control is in effect.
b) For each control, list a test of control to test its effectiveness.
c) For each of the preceding questions identify the nature of the potential financial misstatements.
d) For each of the potential misstatements in part c, list a substantive audit procedure to determine whether a material misstatement exist.