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Sales Transaction
Accounts
Sales
Accounts
receivable
Processing
customer orders
Granting credit
Shipping goods
Billing customers
and recording
sales
Customer order
Sales order
Customer order or
sales order
Shipping document
Sales invoice
Sales transaction file
Sales journal or listing
Accounts receivable
master file
Accounts receivable
trial balance
Monthly statements
Cash in bank
(debits from
cash receipts)
Accounts
receivable
Processing and
recording cash
receipts
Remittance advice
Prelisting of cash
receipts
Cash receipts
transaction file
Cash receipts journal
or listing
Sales returns
and
allowances
Accounts
receivable
Processing and
recording sales
returns and
allowances
Credit memo
Sales and returns and
allowances journal
Accounts
receivable
Allowance for
uncollectible
accounts
Writing off
uncollectible
accounts
receivable
Uncollectible account
authorization form
General journal
Bad debt
expense
Allowance for
uncollectible
accounts
General journal
Granting Credit
Before goods are shipped, a properly
authorized person must approve credit
to the customer for sales on account
Shipping Goods
This is the first point in the cycle
at which the company gives up assets.
One type of shipping document is a
bill of lading.
Bills of lading are often transmitted once
goods have been shipping
Sales
transaction
file
Accounts
receivable
file
Accounts
receivable
trial balance
Sales
journal
Cash receipts
transaction
file
Cash receipts listing
Monthly statements
Internal verification procedures
Control
effectiveness
Control
risk
Transaction-related Audit
Objectives for Sales
Occurrence:
Recorded sales are for shipments actually made.
Completeness:
Existing sales transactions are recorded.
Accuracy:
Recorded sales are for the
amount shipped.
Transaction-related Audit
Objectives for Sales
Posting and summarization:
Sales transactions are correctly included
in the accounts receivable master file.
Classification:
Sales transactions are correctly classified.
Timing:
Sales are recorded on the
correct dates.
Improper
% of completion
Improper
sales cutoff
Fraudulent
Techniques
Premature
revenue
recognition
Unauthorized
shipments
Conditional sales
Round-tripping
loans as sales
Consignment
sales
Summary of Methodology
for Sales
Identify key transaction-related audit objectives
Determine key existing controls
Design tests of controls to verify effectiveness
Evaluate any control deficiencies
Determine extent of substantive tests
of transactions
Materiality
Emphasis
on
objectives
Allowance for
doubtful accounts
Accounts
receivable
Accounts
Cash in
Receivable
Bank
Sales
Cash receipts
transactions
transactions
Audited by
TOC, STOT, and AP
Ending
balance
Audited by
TOC, STOT, and AP
Ending
balance