(i) The document does not specify the physical location of the dispatch department and the cashier, posing a risk of customers taking goods without payment. To mitigate this, customers should settle the payment with the cashier upon receiving an advice note and only obtain the goods upon presenting a paid invoice.

(ii) There is a deficiency in segregating duties by allowing the cashier to both complete the sales invoice and handle cash. This creates an opportunity for fraudulent activities, such as replacing the original invoice with a lower-value one and pocketing the difference.

(iii) There is no verification process for ensuring the accuracy of completed invoices by the cashier, such as confirming correct prices and accurate calculations.

(iv) To verify the completeness of the sales invoice sequence, pre-numbering them sequentially is essential. Additionally, another individual should cross-check the presence of all invoices. Sequential pre-numbering of order forms is also recommended.

(v) There is a lack of oversight to ensure that the cashier deposits all received cash, highlighting another segregation of duties failure.

If the sales department takes responsibility for preparing and posting invoices, as well as posting cash for cash sales to a sundry sales account, several internal control issues can be addressed. Furthermore, implementing a weekly check by the sales department on the account could help identify invoices without corresponding cash receipts for further investigation.

(b) Testing Procedures

(i) Take a sample of order forms issued to customers throughout the year. Follow up by tracing the associated sales invoice and verify that the details align, including the date, unit amounts, etc. It is crucial that the customer has signed for the goods, and a copy of this signed confirmation should be maintained by the despatch department.

(ii) For the sales invoices identified in the previous test, confirm that the correct order form number is recorded on the invoice. Additionally, cross-check the accuracy of the prices used by referring to the prevailing price list.

(iii) Proceed to trace the value of the sales invoices to the cash book. Verify from the cash book that the total receipts for the day have been deposited in the bank and promptly reflect on the bank statement.

(iv) Ensure that the sales invoices have been accurately posted to a cash or sundry sales account. In cases where sales invoices are absent from this account (assuming sequential numbering), trace the canceled invoice and verify that the customer initialed the cancellation. Confirm that it was duly replaced by the subsequent invoice in the sequence.

Due to identified system weaknesses, implement the following sequence checks on substantial blocks of order forms and invoices, such as four blocks of 100 order forms/invoices:

(1) Inspect all order forms to ensure their presence; investigate any missing forms.

(2) Match sales invoices with corresponding order forms.

(3) Verify that all sales invoices in a sequence have been utilized; investigate any gaps.

(4) Confirm that the cash corresponding to each sales invoice has been accurately recorded in the cash book.

1. Lack of separation of duties: In the current system, the same person is responsible for sales invoices and cash handling, which increases the risk of errors or fraud going undetected .

2. Manual processes: The system depends heavily on manual processes such as handwritten sales invoices, which are prone to errors and omissions.

3. Lack of documentation: Since most sales are to small customers without sales ledger accounts, there may be a lack of proper documentation for these transactions, making tracking and verification difficult sales.

B, System-based tests to test controls on the system:

1. Check the separation of duties: Verify whether there is a clear division of duties between employees involved in the sales process, such as those responsible for preparing orders, processing Handle cash and record transactions.

2. Check transactions: Choose a sample of cash sales transactions and track them from the order form to sales invoices, cash receipts, and bank deposits to ensure that all steps are correct. recorded and recorded properly.

3. Reconciliation check: Reconcile daily sales invoices with cash receipts recorded by the cashier to ensure that all cash received has been properly accounted for and deposited in the bank.

4. Authorization checks: Review the cash sales authorization process, including discount or return approval limits, to ensure that all transactions are properly authorized and recorded .

5. Check physical controls: Check physical controls in place for cash handling, such as cash registers, safes, and security measures, to evaluate the security of cash transactions and prevent potential theft or fraud.

•       No division of duties in allowing cashiers to both complete sales receipts and receive cash. This is not good because he can commit fraud by replacing the original invoice with one of lower value and keeping the difference.

•       No one checked the receipt to make sure the cashier filled it out correctly.

•       It is not possible to check the completeness of the sales invoice sequence unless they are pre-numbered in order and the presence of all invoices is checked by someone else.

•       There was no check that all the cash was received by the cashier banks and this was another mistake in the division of duties.

•       All these deficiencies and possible corrective measures should be reported to management.

(b) Inspection

•       Select a sample order form to issue to customers during the year. Track the related sales invoice and check if the details correlate (date, number of units, etc.). The customer must sign for delivery and this copy will be kept by the dispatch department.

•       For the sales invoices discovered in the above test, I would check if the correct order form number is stated on the invoice.

•       Then, I will track the value of the sales invoice to the cash book and from the cash book to know the total amount of money collected for the day has been transferred to the bank and appears promptly on the statement. bank.

•       I will check that the sales invoice has been posted correctly to the cash account or sundry sales account. For any sales invoices missing from this account (assuming they are sequentially numbered), I would track the canceled invoices and check that the canceled invoices were initiated and replaced by the customer. replaced by the next invoice in sequence or not.

•       Due to weaknesses in the system, I would perform the following sequential checks on large blocks of order/invoice forms, for example four blocks of 100 order/invoice forms.

(ii): The completeness of the sequence of sales invoices cannot be checked unless they are pre-numbered sequentially and the presence of all the invoices is checked by another department.

(iii)+(iv): No one checks the invoices to make sure that the cashier has completed them correctly, for example by using the correct prices and performing calculations correctly.

There is a failure in segregation of duties in allowing the cashier to both complete the sales invoice and receive the cash, as they could perpetrate a fraud by replacing the original invoice with one of lower value and keeping the difference.

No one checks the invoices to make sure that the cashier has completed them correctly.

There is a failure in segregation of duties in allowing the cashier to both complete the sales invoice and receive the cash, as they could perpetrate a fraud by replacing the original invoice with one of lower value and keeping the difference.

(v): There is no check that the cashier banks all cash received.

(i)

(ii) The despatch department needs to make original goods despatch notes including all customer order information, then duplicate them into 2 copies, keeping 1 copy for the company and 1 copy for the customer when attached to the despatch order.

(iii) The cashier prepares a handwritten sales invoice. Cashiers can steal customers' money, and sales invoices recorded in the company's accounts system may not match the handwritten invoices sent to customers.

(iv, v) The customer pays the cashier for the goods by cheque or cash, and the cashier records and banks the cash. Cashiers can collude with customers to steal money for goods

Recommend

• Select a sample of sales invoices and compare them with the corresponding order forms and goods dispatched. Verify the accuracy of the amounts, item descriptions, and pricing.

• Examine a sample of order forms and verify their completeness, accuracy, and proper authorization. Ensure that the dispatch department is issuing the correct goods as per the order.

• Review the system's policies, procedures, and manuals. Assess their adequacy, clarity, and adherence within the organization.

• Compare recorded sales with cash receipts and investigate any discrepancies. Review bank statements and verify that all cash receipts are appropriately recorded and deposited.

• Although most sales are cash-based, there may still be some customers with sales ledger accounts. Evaluate the controls over customer credit checks, invoicing, and follow-up o n outstanding balances.

• Assess the procedures for monitoring and controlling inventory levels. Check if there are periodic stock counts, reconcile them with recorded sales, and investigate any significant discrepancies.

1. (i) customers can pick up goods without paying because the dispatcher and cashier are not mentioned. The customer must pay according to he advice note and return for the goods, which is issued upon receipt of a paid invoice

2. (ii) the person completing the invoice and the person receiving the cash must be independent to avoid fraud

3. (iii) there is no one to check invoices

4. (iv) it is impossible to check the completeness of the sales invoice

5. (v) there was no check that the cashier had received the cash in full

b,

1. (i) Select a sample of order forms issued to customers during the year. Trace the related sales invoice and check that the details correlate (date, unit amounts etc). The customer should have signed for the goods and this copy should be retained by the dispatch department.

(ii) For the sales invoices discovered in the above test, I would check that the correct order form number is recorded on the invoice, that the prices used are correct (by reference to the prevailing price list) and that the castings and cross-castings are correct.

(iii) I would then trace the value of the sales invoices to the cash book and from the cash book that the total receipts for the day have been banked and appear promptly on the bank statement.

(iv) I would check that the sales invoices have been correctly posted to a cash or sundry sales account. For any sales invoices missing from this account (assuming they are sequentially numbered), I would trace the cancelled invoice and check that the cancelled invoice was initialled by the customer and replaced by the next invoice in sequence.

(V) Because of the weaknesses in the system I would carry out the following sequence checks on large blocks of order forms/invoices, eg four blocks of 100 order forms/invoices

Lack of segregation of duties: In the described system, the same individual (cashier) is responsible for preparing the sales invoice, receiving payments, and recording/banking the cash. This lack of segregation of duties increases the risk of errors or fraudulent activities going undetected.

Limited documentation: While there is a pre-numbered order form and a sales invoice, there may be insufficient documentation or controls to ensure the accuracy and completeness of transactions. Without proper documentation, it becomes challenging to trace transactions accurately and verify their authenticity.

Lack of authorization controls: There's a potential lack of controls ensuring that sales are authorized appropriately before goods are dispatched and invoices prepared. This could lead to unauthorized sales or incorrect pricing.

Inadequate reconciliation processes: The system does not explicitly mention reconciliation processes to ensure that all transactions are properly recorded and accounted for. Without robust reconciliation procedures, there's a risk of undetected errors or discrepancies in sales and cash records.

b, Systems-based tests to audit the controls over the system:

Review of documentation: Examine a sample of pre-numbered order forms, sales invoices, and cash receipts to ensure they are sequentially numbered and properly filled out. Verify that all transactions are adequately documented.

Segregation of duties test: Review the roles and responsibilities within the sales and cash handling process to assess whether there's adequate segregation of duties. Ensure that different individuals are involved in order processing, cash handling, and recording transactions.

Cash handling procedures: Observe the cash handling procedures to ensure they comply with company policies and best practices. Test the effectiveness of controls over cash counting, recording, and banking to detect any weaknesses or irregularities.

Authorization controls: Review authorization procedures to ensure that sales orders are properly approved before goods are dispatched and invoices prepared. Check for evidence of management review and approval of sales transactions.

Reconciliation procedures: Examine the reconciliation processes between sales records, cash receipts, and bank deposits. Verify that regular reconciliations are performed to identify and resolve any discrepancies promptly.

Testing for completeness: Select a sample of cash sales transactions and trace them from the initial order form to the recording in the sales records and ultimately to the bank deposit. This helps ensure that all transactions are accurately recorded and accounted for.

Fraud detection tests: Perform analytical procedures and substantive tests to detect any indicators of fraud or irregularities in the cash sales process. This could include comparing sales trends, analyzing cash shortages or overages, and investigating any unusual or suspicious transactions.

(ii) For the sales invoices discovered in the above test, I would check that the correct order form number is recorded on the invoice and that the prices used are correct (by reference to the prevailing price list).

(iii) I would then trace the value of the sales invoices to the cash book and confirm from the cash book that the total receipts for the day have been banked and appear promptly on the bank statement.

(iv) I would check that the sales invoices have been correctly posted to a cash or sundry sales account. For any sales invoices missing from this account (assuming they are sequentially numbered), I would trace the cancelled invoice and check that the cancelled invoice was initialled by the customer and replaced by the next invoice in sequence.

(v) Because of the weaknesses in the system I would carry out the following sequence checks on large blocks of order forms/invoices, eg four blocks of 100 order forms/invoices. (1) Inspect all order forms to ensure all present; investigate those missing

(2) Match sales invoices to order forms

(3) Check all sales invoices in a sequence have been used; investigate any missing

(4) Cash for each sales invoice has been entered into the cash book