10 September 2012
Respected Experts, My boss have assigned me the job of doing internal audit of sales of a company. Please tell me what are all the points that i should consider while auditing sales. I will tell u the process of sales followed in that company.
Marketing (or customers directly mail to )--> Customer Sevice Department --> provides work order to the Production Depatment -->Production Department provides Production Completion certificate---> Customers Service Department--> Customer Service Department issues Invoice ---> Accunts Department and Despatch Section.
Please tell me what are all the internal control i have to verify that it exists?
Please provide me the answer...instead of giving me a general link. Last time while i posted this question one expert gave a link which says something about internal audit. I want direct answers pls.
14 September 2012
IV. Sales Processing Orders and Dispatching Goods (i) Are standard price lists maintained? Is a special sanction from a senior manager required in the case of sales at prices lower than the standard prices? (ii) Does the system of allowing quantity rebates and discounts provide for adequate controls? In particular, is there a clear cut policy for allowing such rebates and discounts? Are the authorities of various managers in this regard clearly laid down and are they reasonable? (iii) Are special sanctions required in case of sales to affiliate companies or individuals, or other enterprises in which the managerial personnel or senior employees are interested? (iv) Is there a well-defined policy for making sales to employees at concessional prices? Does it lay down any limits in this regard? (v) Is there a timely preparation of a written sale order on receipt of an order from a customer? (vi) Are sale orders pre-numbered? Is a lack of continuity in sale order numbers duly enquired into? (vii) Is there a proper authorisation of credit, price, quantity and other important terms of the sale order? (viii) Is there a system of fixing credit limits for regular customers? Are these limits approved by a senior manager as per the credit policy determined by the top management? Are these limits reviewed periodically in the light of the experience in dealing with the customer? (ix) Is credit limit of the customer concerned checked before sanctioning the credit on the sale order? Is up-to-date information on the extent of credit already extended to the customer readily available for this purpose? (x) Is a copy of each sale order sent to the despatch department and to the accounts department?
14 September 2012
(xi) Is a despatch document, e.g., A goods outward Challans, prepared at the time the goods are despatched to the customer? Is it matched with the bill of lading or the railway receipt/ transporter’s receipt? (xii) Are despatch documents pre-numbered and missing document numbers duly enquired into? (xiii) Is there a system of checking each consignment of goods leaving the premises with the related despatch document? (xiv) Is a copy of the despatch document, i.e., Goods outward Challans/gate pass sent to the customer and to the accounts department? (xv) Is an acknowledgment of receipt of goods obtained from the customer or from his agent on the copy of the despatch document?
14 September 2012
Billing Customers and Recording Sales (i) Is there a system of preparing sale invoices immediately on receipt of despatch documents? (ii) Do the sale invoices contain all the relevant details including the name of the customer, description and quantity of goods sold, sale price, freight, insurance, sales tax and other charges as well as other major terms of the sale? (iii) Are the sale invoices properly checked (particularly for prices, calculation and terms of payment) and authorised before despatch? Are the particulars such as the name of the customer, quantity, etc., As appearing in the copies of the sale orders, gate pass/other despatch document, and the railway receipt/transporter’s receipt/bill of lading compared with those in the invoices to ensure that proper amounts have been billed to appropriate customers. (iv) Is the original invoice sent to the customer immediately and entries made in the accounting records on a timely basis? (v) Are sale invoices pre-numbered and entered sequentially in the sale summary sheet or the sale book? Is a lack of continuity in sale invoice numbers duly enquired into? (vi) Are copies of sale order, despatch document, railway receipt/transporter’s receipt/ bill of lading attached with the relevant invoice?
14 September 2012
Sale returns (i) Does the system relating to sale returns prescribe limits on the authority of managers at various levels to accept return of goods? (These limits may be in terms of value of the goods returned and the period during which they are returned.) (ii) Are the returned goods accepted only after they have been properly inspected for their quantity and quality? (iii) Is an inward return note prepared promptly against each sale return, indicating the quantity and specifications of the goods received back? (iv) Are the inward returned notes per-numbered? Are missing note numbers duly enquired into? (v) Are returned goods sent to the stores immediately? Are inward return notes entered promptly in inventory records? (vi) Is a credit note prepared on the basis of the inward return note? It is properly checked with reference to the relevant inward return note before it is approved and sent to the customer? Are appropriate entries made in the books of account promptly? (vii) Is there a proper control over the issue of credit notes specially with regard to the authority for issuing the same? (viii) Are credit notes pre-numbered? Are missing credit note numbers duly enquired into? (ix) Is the sale commission paid in respect of goods returned recovered through an appropriate debit note? (x) Are sale returns analyzed with reference to the reasons? Are appropriate follow-up steps taken?
14 September 2012
Claims by Customers (i) Are all claims (for shortfall in quantity, or for poor quality, or for delay in delivery and similar other reasons) approved by an authorized manager? Is the approval granted only after a proper examination of the matter? (ii) Is a credit note sent to the customer in respect of each approved claim? Are appropriate entries made in the books of accounts promptly?
Import Entitlements Are adequate records maintained in respect of import entitlements against export of goods? Are the entitlements properly utilized?
Overall Controls (i) Is there a proper segregation of duties in the various segments of the total sales cycle? Have the duties relating to sales been so allocated that different persons are entrusted the functions of (a) authorization of sales (b) execution of sale transactions, (c) recording of sales, and (d) custody of goods? Are the duties of various persons relating to sales rotated periodically? (ii) Are there adequate cut-off procedures in relation to sales? (iii) Are there adequate cut-off procedures in relation to sale returns? (iv) Is there an internal audit of the entire sales cycle? (v) Is there a system of sending monthly statements of accounts to regular customer? Are the discrepancies intimated by customers in their response and are they properly dealt with?
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