CAT_T8_CS_C3_Cycles_Purchase_doc - INTERNAL CONTROL SYSTEMS...

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INTERNAL CONTROL SYSTEMS 1. INTERNAL CONTROLS OVER SALES (a) State the FIVE components of internal control set out in ISA 315 Assessing the risks of material misstatement through understanding the entity and its environment. (5 marks) (b) State FOUR objectives of the internal control which should be exercised over a sales and trade receivables system. (2 marks) (c) Haydn Co is a limited liability company and wholesale supplier of stationery products. It commenced trading in 20X1 and now has 60 employees with separate sales and accounts departments. However at a recent board meeting, concern was expressed at some aspects of the company's internal control, including those relating to sales and trade receivables. Jon May, the sales director is an excellent salesman and has been largely responsible for the company's growth since 20X1 and for the implementation of the control activities exercised over the company's sales and trade receivables system. The following policies and procedures form part of the control activities exercised over that system. 1 Haydn Co uses a networked integrated sales and general ledger accounts system. The company's accountant and assistant accountant, together with Jon May and the sales department clerks (sales clerks) have full access to all sales ledger files including the master file. 2 Requests from potential customers to open a credit account are forwarded to Jon May, who carries out full credit checks before deciding whether to grant a credit facility. When credit facilities are granted a sales clerk updates the sales ledger master file with the new customer details. Credit limits are not applied to customer
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CAT_T8_CS_C3_Cycles_Purchase_doc - INTERNAL CONTROL SYSTEMS...

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