95%(22)21 out of 22 people found this document helpful
This preview shows page 63 - 66 out of 133 pages.
Potential Problem - If the invoices do not agree, the possibility is raised that fictitious or misstated sales are being recorded. Lack of tangible evidence (e.g., initials) that the matching procedure has been carried out would indicate that the 62
employees are not complying with the requirements of the system.STEP (1-b)Anticipated Results - The quantity and description of the items sold should be the same as the items shipped. Again, Lakeside employees are supposed to have previously made this comparison and left their initials or other proof of the execution of this test.Potential Problem - Differences warn the auditor that sales have been both billed and recorded incorrectly, or incorrect amounts or types of inventory have been shipped. Once again, a lack of compliance by Lakeside's employees may be shown if this comparison has not been made.STEP (1-c)Anticipated Results - Cash received as per the remittance list should be consistent with the invoice and the invoice slip. Customers should be encouraged to include the amount of payment on the invoice slip as a further control procedure. Because of the discount, the auditor may want to perform this step in connection with the discount computation in Step 1-d.Potential Problem - The cash may have been stolen, or someone in the company may be engaged in lapping.STEP (1-d)Anticipated Results - Calculated cash discounts should be identical with the amounts recorded by the client company. In most cases, this calculated discount figure will be equal to the difference between the sales invoice total and the cash remittance.Potential Problem - Discounts may be incorrectly recorded to hide cash shortages or as a step in stealing cash funds from the company. Also, the company may be allowing customers to take discounts that have not actually been earned. Allowing these reductions would indicate lack of efficiency in internal control.STEP (1-e)Anticipated Results - All prices on the invoices should agree with the prices being shown on the approved price list.63
Potential Problems - Wrong amounts may be paid by customers. Improper pricing, either intentionally or unintentionally, also leads to incorrect sales and receivables figures on the financial statements. If the invoice price is too high, sales and income are overstated; if too low, the figures will be understated, and company employees may be receiving kickbacks from customers.STEP (1-f)Anticipated Results - The extensions and footings on the invoice should be correct.Potential Problems - Wrong amounts may be paid by customers. Improper footings or extensions, either intentionally or unintentionally, also leads to incorrect sales and receivables figures on the financial statements.STEP (1-g)Anticipated Results - The amount received according to the invoice slip should agree with the listing of individual items being deposited. In addition, the date of deposit should be the same as the date on which the payment is received.