ACCOUNT TITLE: Sales

Assertions and Controls Possible Misstatements Procedures to be Done

Existence/Occurrence
Recorded sales are for actually made to
costumers.

1. Recording of shipments does not
have any records of costumer
orders, sales orders approved by
the owner, and no need for
approved shipping documents.
2. A charge sales invoice is issued to
sales transaction that requires
shipments. It is attached on the
delivery package; to be received
and verified by the costumer. The
original copy is keep as basis
forcollection/payment.
3. The way-bill/bill of lading from
the shipper is obtain in order to
keep record and trace the
product.
4. For deliveries within the city, the
drivers will be given a copy of the
Sales Invoice where the costumer
will sign upon receiving the
product/s. It will be returned to
the Accounting department as a
proof that the goods were already
delivered.
5. Sold goods that are still on display
are label with a note SOLD to:
xxx.
Goods dispatched may not agree Inquire the person in-charge for
with goods ordered. shipping goods.
Sales may be made to Examine charge sales invoices.
unauthorized customers.
Examine a sample of original
Invoices maybe made for sales invoices to determine whether
fictitious transactions. each one has a shipping document
(way-bill/bill of lading) attached.
Compare a sample bill of lading
Shipped goods appearing in the to its charge sales invoice.
documents may differ to what was
actually delivered by the company.
Observe procedures and inspect
Product/s delivered might documents pertaining to deliveries.
include other products not listed in
the invoice.
Mistakes in delivery may not be
discovered within the period.
A product can be sold twice to
another costumer.

Cash receipts recorded in the accounts

represent cash received from
costumers during the period.

1. A clerk records the accounts

receivable, prepares and mails
monthly statements to costumers
for trade accounts receivable and
follows up on any
complaints.He/She is the also the
one who collects payments.
2. A collection receipt is issued when
payment is received and it is then
attached to the charge invoice for
matching.
Sales adjustment transactions
recorded in the accounts represent
discounts, returns and allowances,
and bad debts applicable to the
Errors in recording sales on
account may not be detected.
Made-up receivables may exist.
Collection for payment may be
recorded as sales for the current
period.
Observe and make inquiries
about the performance of various
functions.
Inquire by sending letters to a
sample of accounts receivable
customers to verify whether they
have an outstanding balance at
December 31, 2015.
 period.
1. Sales clerk are oriented to give
discounts to the extent imposed by
the management. Large discounts
are communicated to the manager
(in the absence, the accounting
department).
2. Sales returns and allowances are
communicated between the selling
department and the costumer.
Agreed terms are then carried out
and then communicated to the
accounting department.
3. The receivables from costumers
will be deemed uncollectible if
within 1 year, they cant still pay.
Improper judgement on the
discounts given may affect sales
significantly.
Existing illegal terms
communicated between parties
may not be discovered.
The person-in-charge may write-
off wrong accounts.
Observe procedures and examine
follow-up lines.
Inquire information on the
process and conditions when a
costumer returns the product
and/or asks for allowance.
Review the entitys records on
the costumers account. Inspect on
the trends in bad debts.

Completeness
All sales transactions that occurred
are recorded. Observe and make inquiries
1. Pre-numbered charge sales invoices Some sales may not be invoiced. about the use of pre-numbered
are accounted for to determine that documents and inspect evidence of
sales are recognize.
accounting for the sequence.
2. Pre-numbered cash sales receipts
Erroneous receipts issued may For a sample of shipping
are accounted for to determine that
not be detected immediately. documents selected from shipping
cash sales are recorded.
3. All records on sale are being records, trace each shipping
Some sales would not be posted
inputted in their information on the document to a transaction recorded
in the information system.
basis of their issued invoices (charge in information system.
sales invoice and cash sales invoice).
All cash received from the costumer
during the period are recorded as cash
receipts in the account.
1. Pre-numbered collection receipts
Collections may be posted to the Review on the records of the
are accounted for to acknowledge costumers payments (collection
wrong costumer account.
payment of credits by the
receipts) and match it to the charge
costumer.
sale invoices made.

Accuracy
All sales, cash receipts and sales
adjustments are properly recorded.
1. Their receipts and invoices are Sales may have incorrect prices. Vouch recorded sales to
their source of information on supporting documents.
sales made during the period. Fictitious sales transactions may
be recorded.
Cut-off
All sales, cash receipts and sales
adjustments are properly recorded in
the current period and those arising
after the period end are included in
the next accounting period.
1. Procedures to ensure timely
recording of sales and proper cut-
off are established.
Rights and Obligations
Sales recorded represent only sales
transactions.
1. Clerk checks sales invoice for terms
determine that transactions is a
sale rather than a consignment.
2. It has Memorandum of Agreement
(MOA) to its consignee to properly
agree on terms and conditions on
sales.
Valuation/Measurement
Sales are correctly billed and recorded.
1. For all goods to be shipped, the
sales clerk is assigned to check on
the products to be delivered
and/or to be shipped if it
corresponds to what is recorded
in the invoice.
2. On rare cases, the company
accepts sales on account from the
friend of the owner. Costumer
credit is approved by the manager
only.
3. There is no authorization needed
from the manager prior to
merchandise shipment.
4. Sales invoices are reviewed by the
purchasing officer for proper
pricing and discounts.
5. Sales transactions are directly
recorded in the information
system. It doesnt maintain a
ledger.
Sales occurring during the
period may not be record for the
year but would be recorded for the
next year.
Wrong judgement towards
recognition of sales maybe given.
More or fewer goods may have
been shipped than ordered.
Customers returns may occur.
Some costumers will receive
favor on their credit terms and
selling price. Accounts receivable
may be uncollectible.
Sales may be made to
unauthorized customers.
Large variance on cost and
selling price might occur.
Mistakes in recording in the
information cannot be traced from
other records. Errors in accounts
receivable increases.
Examine sales invoices for the last
five sales transactions recorded in
the information system in 2015 and
examine shipping documents to
determine they are recorded in the
correct period.
Obtain a copy of MOA. Inspect
and understand the terms that have
significant effects on the sales
transactions cycle.
Understand the nature of the
sales and observe on how
consignment transactions are
treated.
Observe procedure. For a
sample, examine signature on
documents evidencing performance.
Inquire and examine sales credit
for selected transactions.
Inquire on the person in-charge
of making shipments.
Observe procedure. Inquire on
their standard discounts given and
compare to what was actually given.
Observe procedure. Check on the
information system used.
ACCOUNT TITLE: Cash
Assertions and Controls Possible Misstatements Procedures to be Done
Existence
Completeness
Accuracy
Cut-off
Classification

ACCOUNT TITLE: Inventory

Assertions and Controls Possible Misstatements Procedures to be Done
Existence
Completeness
Accuracy
Cut-off
Classification

ACCOUNT TITLE: Accounts Receivable

Assertions and Controls Possible Misstatements Procedures to be Done
Existence
Completeness
Accuracy
Cut-off
Classification

ACCOUNT TITLE: Accounts Payable

Assertions and Controls Possible Misstatements Procedures to be Done
Existence
Completeness
Accuracy
Cut-off
Classification

ACCOUNT TITLE: Expenses

Assertions and Controls Possible Misstatements Procedures to be Done
Existence
Completeness
Accuracy
Cut-off
Classification