Internal Control over the followings is included in the syllabus:

 INTERNAL CONTROL OVER SALES

 INTERNAL CONTROL OVER PURCHASE

 INTERNAL CONTROL OVER INVENTORY

 INTERNAL CONTROL OVER CASH PAYMENTS

 INTERNAL CONTROL OVER CASH RECEIPTS

 INTERNAL CONTROL OVER PAYROLL

 INTERNAL CONTROL OVER REVENUE & CAPITAL

EXPENDTIURE
Internal Control over Sales
Assertion Control objectives Controls Tests of controls
Occurrence  One person is not  Segregation of duties.  Observe and evaluate
and existence responsible for taking whether proper
orders, recording segregation of duties is
sales and receiving operating.
payments.

 Recorded sales  Sales recorded only  Test a sample of sales

transactions represent approved sales order invoices for authorized
goods shipped. form and shipping sales order form and
 Goods and services documentation. shipping
are only supplied to documentation.
customers with good  Examine application
credit ratings. controls for
authorization.
 Accounting for  Review and test entity’s
numerical sequences of procedures for
invoices. accounting for
numerical sequences of
 Monthly customer invoices.
statements sent out and  Review entity’s
customer queries and procedures for sending
complaints handled out monthly
independently. statements and dealing
with customer queries
 Authorization of credit and complaints.
terms to customers  Review entity’s
(senior staff procedures for granting
authorization, credit to customers.
references/credit checks
for new customers,
regular review of credit
limits)

 Authorization by senior
 staff required for  Examine a sample of
changes in other sales orders for
customer data such as evidence of proper
address etc. credit approval by the
appropriate senior staff
 Orders not accepted member.
unless credit limits
reviewed first.  Examine application
controls for credit
limits.

 Review all new

customer files to
 Goods and services ensure satisfactory
are provided at  Authorized price lists credit reference have
authorized prices and and specified terms of been obtained.
on authorized terms. trade in place.
 Customers are  Compare prices and
encouraged to pay terms on a sample of
promptly. sales invoices to the
authorized price list
and terms of trade.
 Examine application
controls for authorized
prices and terms.
Completeness  All revenue relating to  Accounting for  Review and test entity’s
goods dispatched is numerical sequences of procedures for
recorded. invoices. accounting for
numerical sequences of
invoices.

 All goods and services  Shipping  Trace a sample of

sold are correctly documentation is shipping documents to
invoiced. matched to sales the sales invoices and
invoices. ledger.
 Sales invoices are  Review a sample of
reconciled to the daily reconciliations
 sales report.
 An open-order file is
maintained and
reviewed regularly.
Accuracy  All sales and  Sales invoices and
adjustments are matching documents
correctly journalized, required for all entries.
summarized and
posted to the correct
accounts.
Cut-off  Transactions have  All shipping
been recorded in the documentation is
correct period. forwarded to the
invoicing section on a
daily basis.
 Daily invoicing of goods
shipped.
Classification  All transactions are  Charts of accounts in
properly classified in place.
accounts.  Codes in place for
different types of
products or services.
performed.
 Inspect the open-order
file for unfiled orders.
 Vouch recorded sales to
supporting documents.
 Compare dates on sales
invoices with dates of
correspondence
shipping
documentation.
 Compare dates on sales
invoices with dates
recorded in the sales
ledger.
 Review sales ledger for
proper classification.
 Examine a sample of
sales invoices for
proper classification.
 Test application
controls for proper
codes.
Internal Control over Purchases
Assertion Control objective Controls Tests of controls
Occurrence  Recorded purchases  Authorization  Inspect policies and
and existence represent goods and procedures and policies procedures and inquire
services received. in place for ordering about them.
goods and services.  Observe and evaluate
 Segregation of duties. segregation of duties.
 Purchase orders raised  Examine a sample of
for each purchase and purchase orders to
authorized by ensure they have been
appropriate senior appropriately
personnel. authorized.
 Review the delegated
list of authority for
purchases.
 Approved purchase  For a sample of orders,
order for each receipt examine the goods
of goods. received note (GRN)
and match it to the
order.
 Staff receiving goods;  Observe receipt of
check them to the goods by staff to
purchase order. confirm whether the
check is done.
 Stores clerks sign for  Inspect a sample to
goods received. confirm whether stores
staff undertakes this
check.
 Purchase orders and  Examine supporting
GRNs are matched with documentation for a
the suppliers’ invoices. sample of invoices.
Completeness  All purchase  Purchase orders and  Examine supporting
transactions that GRNs are matched with documentation for a
occurred have been the suppliers’ invoices. sample of invoices.
recorded.
 Periodic accounting for  Review entity’s
 pre-numbered GRNs procedures for
and purchase orders. accounting for pre-
numbered documents.
 Independent check of  Examine application
amount recorded in the controls.
purchase journal.  Examine
documentation for
evidence of this check.
Rights and  Recorded purchases  Purchase orders and  Examine supporting
obligations represent the GRNs are matched with documentation for a
liabilities of the entity. the suppliers’ invoices. sample of invoices.
Accuracy,  Purchase transactions  Purchase orders and  Examine supporting
classification are correctly recorded GRNs are matched with documentation for a
and valuation in the accounting the suppliers’ invoices. sample of invoices.
system.  Mathematical accuracy  Recalculate the
of the supplier‘s invoice mathematical accuracy
is verified. of a sample of
suppliers’ invoices.
 Amount posted to  Review reconciliations
general ledger is for evidence of this
reconciled to the check.
purchase ledger.
 Chart of accounts in  Review purchases
place. journal and general
ledger for
reasonableness.
Cut-off  Purchase transactions  All goods received  Compare dates on
are recorded in the reports forwarded to reports to dates on
correct accounting accounts payable relevant vouchers.
period. department daily.
 Procedures in place  Compare dates on
that require recording vouchers with dates
of purchases as soon as they were recorded in
possible after the purchase journal.
goods/services
received.
Internal Control over Inventory
Assertion Control objectives Controls Test of controls
Occurrence  All inventory  Pre-numbered  Review
and existence movements are documentation such documentation in
authorized and as GDNs and GRNs in use.
recorded. use.
 Reconciliations of  Review a sample of
inventory records reconciliations to
with general ledger. confirm they are
performed and then
reviewed by an
independent person.
 Segregation of  Observe and
duties. evaluate proper
segregation of
duties.

 Inventory included  Physical safeguards  Review security

on the statement in place to ensure systems in place
of financial position inventory is not (e.g. locked
physical exists. stolen. warehouse, CCTV
etc).
 Separate  Review policies and
responsibilities for procedures in place;
maintenance of discuss procedures
records and with relevant staff.
custodianship.
 Inventory counted  Review procedures
regularly. for counting
inventory.
 Attend inventory
count.
Completeness  All purchases and  Procedures in place  Review entity’s
sales of inventory to include inventory procedures relating
have been held at third parties to consignment
recorded in the and exclude inventory.
accounting system. inventory held on
consignment for
third parties.
 Reconciliations of  Review
accounting records reconciliations
with physical with performed and
physical inventory. whether reviewed
by independent
person.
Rights and  Inventory records  Procedures in place  Review entity’s
obligations only include items to include inventory procedures relating
that belong to the held at third parties to consignment
entity. and exclude inventory.
inventory held on
consignment for
third parties.
Accuracy,  Inventory  Periodic or annual  Review and test
classification quantities have comparison of entity’s procedures
and valuation been accurately inventory with for taking physical
determined. amounts shown in inventory.
continuous
(perpetual)
inventory records.

 Inventory is  Standard costs  Review and test

properly stated at reviewed by entity’s procedures
the lower of cost management. for developing
and net realizable standard costs.
 value.  Review the cost  Inspect variance
accumulation and reports produced.
variance reports.
 Inventory managers  Discuss with
review inventory inventory managers
regularly to identity how this is done.
slow-moving,  Observe the
obsolete and excess procedures being
inventory. performed.
Cut-off  All purchases and  All dispatch  Inspect
sales of inventory documents documentation to
are recorded in the processed daily to confirm daily
correct accounting record the dispatch processing.
period. of finished goods.
 All goods inwards  Inspect
reports processed documentation to
daily to record the confirm daily
receipt of inventory. processing.
 Reconciliations of
inventory records  Review
with general ledger. reconciliations
performed.
Presentation  Inventory  Orders for materials  Review entity’s
and transactions and and production data procedures and
disclosure balances are forms used to documentation used
assertions properly identified process goods to classify inventory.
and classified in the through
financial manufacturing.
statements.

 Disclosures relating  Approvals by finance  Review entity’s

to classification and director. working papers for
valuation are evidence.
sufficient.
Internal Control over Payroll
Assertion Control objectives Controls Tests of controls
Occurrence  Payment is made  Segregation of duties  Observe and evaluate
only to bona fide between HR and payroll proper segregation of
and existence
employees of the functions. duties.
entity.  Personnel files held for  Review a sample of
all employees. starters and leavers in
the year to ensure
correct
documentation is in
 Authorization place.
procedures for hiring,  Review and test
terminating, time authorization
worked, wage rates, procedures in place.
overtime, benefits etc.  Review policies and
procedures in place
for charging status and
consider whether
 Any changes in adequate.
employment status of  Review personnel files
employees (e.g. for a sample of
maternity, special leave employees whose
etc) informed to Human status changed in the
Resources department. year.
 Use of time clocks to
record time worked.  Observe employees’
 Clock cards approved by use of time clock.
supervisor.  Inspect a sample of
clock cards for
evidence of approval
by appropriate level
 Only employees with managers.
valid employee numbers  Review and test
are paid. procedures for
entering and removing
employee numbers
 from the payroll
 Payroll budgets in place master file.
and reviewed by  Review budgeting
management. procedures.

Completeness  All payroll costs are  Pre-numbered clock  Review numerical

recorded for work cards in use. sequence of clock
done by employees. cards.
 Segregation of duties.  Observe and evaluate
 Authorization of wage proper segregation of
cheque cashed duties.
 Encashment of If wages are paid in cash
cheque.  Attend the pay-out of
 Security of pay wages to confirm that
packets. the official procedures
 Security of transit. are being followed.
 Security and  Before the wages are
prompt banking paid compare payroll
of unclaimed with wages packets to
wages. ensure all employees
 Verification of have a wage packet.
distributions.
 Preparation and
authorization of
cheques and bank
transfer lists.
 Comparison of cheque  Examine receipts given
and bank transfer list by employees; check
with payroll. unclaimed wages are
 Maintenance and recorded in unclaimed
reconciliation of wages wages book.
and salaries bank  Observe whether any
account. employee receive
 Preparation and more than one wage
authorization of cheque packet.
and bank transfer list.  Inspect the unclaimed
 Comparison of cheques wages book entries
 and bank transfer list with the entries on the
with payroll. payroll to ensure they
agree.
 Maintenance and  Check that unclaimed
reconciliation of wages wages are banked
and salary bank account. regularly by inspection
of bank statements
and supporting
documentation.
 Inspect that unclaimed
wages books to check
it shows reasons why
wages are unclaimed.
 Review pattern of
unclaimed wages in
unclaimed wage book;
variations may
indicate failure to
record.
Holiday pay
 Verify a sample of
payments with the
underlying records
and check the
calculation of the
amounts paid by
recalculation.
 For salaries, review
whether comparisons
are being made
between payment
records.
 Examine paid cheques
or a certified copy of
the bank list for
employees paid by
cheque or bank

Accuracy,  All benefits and  Verification of payroll
deductions (tax, amounts and benefits
classification
pension etc) are calculations.
and valuation computed correctly.  Payroll budgets in place
and reviewed by
management.
 Agreement of gross
earnings and total tax
deducted with taxation
returns.
 Payroll transactions  Changes to master
correctly recorded in payroll file verified
the accounting through before and
system. after reports.
 Payroll master file
reconciled to general
ledger.
Cut-off  Payroll transactions  All starters, leavers,
are recorded in the changes to salaries and
correct accounting deductions are reported
period. promptly to payroll
department and
changes are updated to
the payroll master file
promptly.
Presentation  Payroll transactions  Chart of accounts.
are properly
and
classified in the  Independent approval
disclosure financial statements. and review of accounts
assertions charged to payroll.
 Payroll budgets in place
transfer.
 Recalculate benefits
and deductions for a
sample of employees.
 Review budgeting
procedures.
 Inspect
documentation for
evidence of
management’s review.
 Review reconciliation
before and after
reports to payroll
master file.
 Review reconciliation
payroll master file to
general ledger.
Confirm whether
discrepancies are
followed-up promptly
and resolved.
 Review entity’s
procedures for
reporting changes to
the payroll
department.
 Check sample of
starters and leavers.
 Review chart of
accounts.
 Review procedures for
classifying payroll
costs.
 Review budgeting
and reviewed by procedures.
management.
Internal Control over Cash Receipts
Assertion Control objectives Controls Tests of controls
Occurrence  All valid cash receipts  Segregation of duties.  Observe and evaluate
are received and proper segregation of
deposited. duties.
 Use of electronic cash  Examine application
receipts transfer nor controls for electronic
received or deposited. cash receipts transfer.
 Monthly bank  Review monthly bank
reconciliations reconciliations to
performed and confirm performed and
independently reviewed.
reviewed.
 Use of cash registers or  Observe cash sales
point-of-sale devices. procedures.
 Periodic inspections of  Inquire of managers
cash sales procedures. about results of
inspections.
 Restrictive  Observe mail opening,
endorsement of including endorsement
cheque immediately on of cheques.
receipt.
 Mail opened by two  Observe mail opening
staff members. procedures.
 Immediate preparation  Observe preparation of
of cash box or list of cash receipts’ records.
mail receipts.
 Independent check of  Review documentation
agreement of for evidence of
cash/cheques to be independent check.
deposited at bank with
register totals and
receipts listing.
 Independent check of  Review documentation
agreement of bank for evidence of
deposit slip with daily independent check.
 cash summary.
Completeness  All cash receipts are  Segregation of duties.  Observe and evaluate
recorded. proper segregation of
duties.
 Use of electronic cash  Examine application
receipts transfer not controls for electronic
received or deposited. cash receipts transfer.
 Monthly bank  Review monthly bank
reconciliations reconciliations to
performed and confirm performed and
independently reviewed.
reviewed.
 Daily cash receipts  Review reconciliation.
listing reconciled with
posting to customer
accounts.
 Customer statements  Inquire of
prepared and sent out management about
on a regular basis. handling of customer
statements.
 Examine a sample of
customers and note
frequency of
statements.
Accuracy,  Cash receipts  Daily remittance report  Review reconciliations.
recorded at correct reconciled to control
classification
amounts. listing of remittance
and valuation advices.
 Monthly bank  Review reconciliations
statement performed for evidence they were
and reviewed performed and
independently. independently
reviewed.

 Cash receipts posted  Daily remittance report  Review reconciliations.

to correct receivables reconciled daily with
accounts and to the postings to cash
 general ledger. receipts journal and
customer accounts.
 Monthly customer  Review entity’s
statements sent out. procedures for sending
out statements.
 Monthly cash receipts  Review journal and
journal agreed to posting to general
general ledger ledger.
postings.

 Receivables’ ledger  Review reconciliations.

reconciled to control
account.
Cut-off  Cash receipts are  Bank reconciliation at  Review and test
recorded in the period-end. reconciliation.
correct accounting
period.
Presentation  Cash receipts are  Chart of accounts.  Review cash receipts
charged to the journal for unusual
and
correct accounts. items.
disclosure  Trace cash receipts
assertions from listing to cash
receipts journal for
proper classification,
Internal Control over Cash Payments
Assertion Control objectives Controls Test of controls
Occurrence  Only valid cash  Segregation of duties.  Observe and evaluate
payments are made. proper segregation of
duties.
 Supplier statements  Review procedures for
independently reconciling supplier
reviewed and statements.
reconciled to trade
payments records.
 Monthly bank  Review reconciliations
reconciliations to confirm whether
prepared and reviewed. undertaken and
reviewed.
 Only authorized staff  Review delegated list of
can make electronic authority for cash
cash payments and payments.
issue cheques.
 Electronic cash  Inspect relevant
payments and cheques documentation for
prepared only after all evidence of approval by
source documents have senior personnel.
been independently
approved.
Completeness  All cash payments  Segregation of duties.  Observe and evaluate
that occurred are proper segregation of
recorded. duties.
 Supplier statements  Review procedures for
independently reconciling supplier
reviewed and statements.
reconciled to trade
payable records.
 Monthly bank  Review reconciliations
reconciliations to confirm whether
prepared and reviewed. undertaken and
independently
 reviewed.
 Reviewed manager  Inspect sample of
before release. listings for evidence of
senior review.
 Daily cash payments  Review a sample of
reconciled to posting to reconciliations for
payables accounts. evidence that they have
been done.
 Use of pre-numbered  Examine evidence of
cheques. use of pre-numbered
cheques.
Accuracy,  Cash payments  Reconciliation of daily  Review reconciliation to
classification recorded correctly in payments report to ensure performed,
and valuation the ledger. electronic cash reviewed and any
payment transfers and discrepancies followed
cheques issued. up on a timely basis.
 Supplier statements  Review reconciliations
reconciled to payable for a sample of
accounts regularly. accounts.
 Monthly bank  Review bank
reconciliations of bank reconciliations for
statements to ledger evidence it was done
account. and independently
reviewed.

 Cash payments posted  Supplier statements  Review reconciliations

to correct payable reconciled to payable for a sample of
accounts and to the accounts regularly. accounts.
general ledger.  Agreement of monthly  Review postings from
cash payments journal journal to general
to general ledger ledger.
posting.

 Payable accounts  Review reconciliation,

reconciled to general to ensure performed
ledger control account. reviewed and any
discrepancies followed
 up on a timely basis.
Cut-off  Cash payments are  Reconciliation of  Review reconciliation
recorded in the electronic funds and check it is carried
correct accounting transfers and cheques out regularly.
period. issued with postings to
cash payments journal
and payable accounts.
Presentation  Cash payments are  Chart of accounts.  Review cash payments
and charged to the correct journal to assess
disclosure accounts. reasonableness of
charging of accounts.
assertions
 Independent approval  Review assignment of
and review of general general ledger account.
ledger account
assignment.
Internal Control over Revenue and capital expenditure
Assertion Controls Tests of control
Authorization  All expenditure is authorized.  Review policies and
procedures in place.
 Orders for capital items should be  Examine a sample of orders
authorized by appropriate levels of for appropriate authorization.
management.
 Order should be requisitioned on
appropriate (different to revenue)
documentation.
 Invoices should be approved by the person
who authorized the order.
 Invoices should be marked with the
appropriate general ledger code.
Classification  All expenditure is classified correctly in the  See section 2.
financial statements as capital or revenue
expenditure.
 All the standard controls over purchases
are relevant here (see section 2).
Completeness  All non-current assets are correctly  Review reconciliation to
recorded in the accounting system. ensure it is regularly carried
 Capital items should be written up in the out, review by a more senior
non-current asset ledger. person, and that all
 The non-current asset register should be discrepancies are followed up
reconciled regularly to the general ledger and resolved on a timely basis.
and any differences investigated and
resolved promptly.