Internal Control - Accounts Receivable and Credit Sales

Typical errors or irregularities include:

● Sales amounts recorded incorrectly

● Goods shipped but not billed to customer
● Goods billed to customer but not shipped
● Sales recorded in wrong accounting period
● Goods sold to customers who were bad credit risks
● Sales occurred that were not authorised
● Sales posted to wrong account
● Unauthorized write-offs of receivables may have occurred.

Internal Control Questionnaire

These questions are designed around the perfect sales system. If the control does
not exist then you tick ‘No’. The auditor then uses this information to identify
weaknesses in the current sales system and relate them to what could go wrong in
the accounts.

“Can only approved customers be included in the sales Yes No

ledger?”
1 Do all prospective customers undergo credit approval 
procedures?
If so
2 Must a standard, signed, application form be submitted? 
3 Are two forms of identity obtained and details checked to 
application form?
4 Are credit references obtained? 
5 Are credit limits set for all credit customers? 
6 Are credit limits reviewed:
every 3 months 
where debtor days exceed 3 months 
where the debtor balance exceeds 75% of the credit limit 
7 Where a credit limit is set above £100 is this based on either a 
recent set of published accounts or past transaction history?
8 Are all new account applications signed as authorised by the 
Accounts Manager?

Continued...
 “Can orders only be accepted for recognised customers Yes No
within their credit limit?”
1 Are credit sales orders accepted only for approved customers 
(on the sales ledger)
2 Are all orders checked against the current sales ledger 
balance
3 Are all orders that take the balance to within 75% of the 
credit limit passed to the sales manager for approval
4 Do all orders record an order approval reference number or 
get signed by the credit controller
5 Is an aged debtor analysis prepared each month? 
6 Are systems of chasing letters/solicitors letters in place for all 
balances outside of payment terms?
7 Are customers in default immediately put on stop? 

“Do all goods despatched result in a customer being Yes No

invoiced?”
1 Are orders recorded on a pre-numbered sales order 
2 Are pre-numbered goods despatch notes raised for all goods 
taken from stores?
3 Can a Goods despatched note (GDN) only be raised on the 
basis of an approved sales order?
4 Are GDNs matched/retained with sales orders? 
5 Does someone independent of the warehouse check goods 
leaving the premises with the related GDNs?
6 Do customers sign for all goods accepted? 
7 Are any queries agreed with the driver and recorded on the 
GDN?
8 Do both parties sign the amendments to the GDN? 
9 Are signed GDNs/orders checked back in by the warehouse 
and any changes approved?
10 Does the warehouse manager check the sequence of GDNs to 
ensure all returned by the driver?
11 Are all GDNs passed to the sales ledger department? 
12 Are all invoices raised based on the GDN set? 
13 Is a copy of the GDN referenced to the sales invoice number 
and filed in numerical order?
14 Does the accounts manager check the sequence of processed 
GDNs each month?
15 Does the accounts manager check invoices for accuracy and 
validity (based on approved sales order, GDN and price lists)

Continued...
 “Are all invoices raised recorded in the sales ledger?” Yes No
1 Is the invoicing assistant a different person to the sales ledger 
assistant?
2 Are invoices recorded in the sales day book in numerical order 
3 Does the accounts manager check the sequence of invoices 
recorded in the sales day book, each month?
4 Are invoice sets filed in numerical order? 
5 Is the sales ledger assistant a different person to the invoicing 
assistant?
6 Are the sales day book totals posted to the main ledger by the 
Accounts Manager (as distinct from the sales ledger
assistant)?
7 Is sales ledger control account reconciliation performed by 
the accounts manager every month?
8 Are statements issued monthly to active sales ledger 
accounts?
9 Is the statement run checked against the list of balances by 
the accounts manager?

“Can items in the sales ledger only be cleared by valid Yes No

payment, credit note or journal entry?”
1 Are all credit notes approved by the sales manager? 
2 Does the accounts manager review all material credit notes 
issued during the month?
3 Can journal entries only be entered by the Accounts 
Manager?
4 Are cash receipts posted from the cash book each month 
5 Is sales ledger control account reconciliation performed by 
the accounts manager every month?

Continued...
 “Is all cash received correctly identified, recorded, posted Yes No
and promptly banked?”
1 Is all cash received in the post recorded immediately into a 
cash diary, to which it is cross referenced?
2 Do at least two people open the post? 
3 Is all cash received then passed immediately to the cashier, 
intact?
4 Is the cash receipts book written up by the cashier before 
lunch each day?
5 Is cash banked daily? 
6 Is cash banked intact? 
7 Is the time and route of the daily banking varied each day? 
8 Is proper insurance held to cover loss on the premises or in 
transit?
9 Is fidelity insurance in place for all staff? 
10 Is all cash retained on site kept in a locked safe? 
11 Does the accounts manager check a sample of the cash diary 
daily takings to the cash book?
12 Is the cash book posted to the sales ledger by someone 
different to the cashier?