Items 1 through 9 are selected questions of the type generally found in internal control questionnaires used by auditors to obtain an understanding of internal control 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 “no” indicates a potential deficiency.
1. Are customer orders evaluated for credit approval by someone independent of sales?
2. Are online sales automatically recorded in the sales system?
3. Are unit prices obtained from a pre-approved and restricted master file of unit prices?
4. Is the bill of lading information forwarded in a timely fashion to accounting to ensure recording in the sales journal?
5. Is the numerical sequence of bills of ladings accounted for to identify duplicates or missing documents?
6. Are entries in the sales journal restricted to those that are supported by a valid bill of lading?
7. Are sales invoice amounts independently verified for correctness?
8. Are individuals responsible for handling cash collections independent of accounting and shipping functions?
9. Are entries in the sales journal timely recorded in the accounts receivable master file?
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 exists.
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