Surname 1

Name

Course

Tutor

Date

a. Use the format provided to identify all existing controls for management’s

assertions of the sales transactions

Assertions Cash receipts transaction controls

Occurrence performing cut off tests to ensure that payroll
costs incurred during the period have been
recorded during the period by examining
entries in the payroll just before and after the
period end and checking back to source
documents, such as time sheets and clock
cards.
Completeness Performing starters and leavers tests to ensure
that staff are not paid before they join the
company or after they leave. This involves
checking the payroll for two separate periods
and examining entries relating to starters and
leavers in the intervening period. Manually
checking the accuracy of payroll calculations
to ensure that correct payments and
deductions are being made in accordance with
approved pay rates and approved deduction
rates. Reviewing evidence of authorization
controls to ensure that the payroll has already
been checked.
Accuracy As from completeness, above, and checking
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to ensure that the payroll has been properly

authorized and reviewed.
Checking entries relating to hours or time
worked in the payroll to source
documentation.
Posting and summarization Reviewing the financial statements with the
aid of disclosure check list to ensure that
disclosure requirements have been met.
Reviewing the overall presentation of payroll
transactions and balances.
Clarification All transactions should be authorized by an
independent party just to ensure they are
accurate
Timing To develop a general strategy and detailed
approach for the specific nature, timing and
extent of the audit work. This will help to
ensure that the audit is carried out in an
efficient and timely manner. So that attention
is devoted to the important areas of the audit.
planning will also help to identify problem
areas so they can be addressed in a timely
fashion

b. Use the format provided to identify all existing controls for management’s
assertions of the cash receipts transactions
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Assertion Cash receipts transaction controls

Occurrence From Taylor’s Fashion Fair some transactions
are made on cash basis, Money in all forms is
highly susceptible to misappropriation. For
this reason regular bank reconciliations
should be carried out by senior independent
officials. Outstanding items should be
investigated, particularly if they are long
outstanding.

Completeness At the conclusion of the day, the supervisor

plans the cash and sales and compares the
totals to the cash register tape. The supervisor
deposits the money at the end of each day in
the bank’s deposit box. The cashier’s invoice
copies are sent to the accounts receivable
clerk together with the sales receipts
summary. The bank posts the bank deposit
slip straight to the accounts receivable clerk.
From this statement the cashier can alter the
bank statement details and risk the complete
record of amount in cashbook
Accuracy Each clerk has her or her own sales book
with three copy, pre-numbered, sales slips
attached, multicolored sales slips attached, but
they are perforated, this increases chances of
errors and fraud because some information
might be lost due to perforation of sales book
Posting and summarization Mary who an accountant and forbidden from
handling cash, obtains the clerks daily
summary and supervisor’s summary. She
inserts all the daily invoices into the
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company’s computer that in turn gives a

complete print out of all summaries and
inputs. This can lead to entry errors and even
wrong information.
Clarification Each month Mary posts reports generated by
the computer to clients. Disagreements and
Complaints from clients are given to Mrs.
Taylor, she resolves them and later informs
Mary in script of any misstatements and
mistakes that require rectification. This might
demoralize Mary because she is responsible
for preparation of organizations statements.

Timing Proper timing will help Taylors Fashion Fair

to identify problem areas so they can be
addressed in a timely fashion. Mary designs
the stock monthly totals, on each final day of
the month. The inventories are counted by the
sales clerks after store hours on every final
day of the month. Salesclerks count all
inventory after store hours on the for
comparison purposes. All inventory shortages
are reported to Mrs. Taylor who then directs
Mary to corrects the errors

c. Identify deficiencies in internal controls for sales and cash receipts.

ISA 400: “Internal control system” means all the policies and procedures (internal controls)

adopted by the management of an entity to assist in achieving management’s objective of

ensuring, as far as practicable, the orderly and efficient conduct of its business, including

adherence to management policies, the safeguarding of assets, the prevention and detection of
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fraud and error, the accuracy and completeness of the accounting records, and the timely

preparation of reliable financial information.

From Taylor’s Fashion Fair some transactions are made on cash basis, Money in all forms is

highly susceptible to misappropriation. For this reason regular bank reconciliations should be

carried out by senior independent officials. Outstanding items should be investigated,

particularly if they are long outstanding.

Every salesclerk has his/her own sales book with is multicolored sales slips attached , pre-

numbered, three copy although they are perforated, this increases chances of errors and fraud

because some information might be lost due to perforation of sales book.

From Taylors Fashion Fair, when the sale is for cash, its only one clerks who marks all the

three copies, receives cash and presents it to the main cashier. This increase chances of errors

and fraud by the clerk. There should be segregation of duties, one person cannot process and

record complete transactions from beginning to the end without being checked by another

person.

Immediately after the main cashier has approved the sales book, the clerk changes his/her

sales book, this can lead to fraud. Only one sales book should be maintained.

Since the computer system automatically set to gives final values totals of the general

journals, any wrong entry leads to final error. The entry of raw data should be carefully verified

and entered into the system. Wrong data entry will mean all the output will have errors.