ACCA F8 - Audit and Assurance Revision Kit 2016

(a)
Tinkerbell – Tests of control and test objectives for the sales cycle
Test of control
Enter an order for a fictitious customer account
number and ensure the system does not accept it.
Inspect a sample of processed credit applications
from the credit agency and ensure the same credit
limit appears in the sales system.
For a sample of invoices, agree that current prices
have been used by comparing them with prices
shown on the current price list.
For a sample of invoices showing discounts, agree
the discount terms back to the customer master file
information.
For a sample of orders ensure that an order
acceptance email or letter was generated.
Visit a warehouse and observe whether all goods
are double checked against the GDN and despatch
list before sending out.
Test objective
To ensure that orders are only accepted and
processed for valid customers.
To ensure that goods are only supplied to
customers with acceptable credit ratings.
To ensure that goods are only sold at authorised
prices.
To ensure that sales discounts are only provided to
those customers the sales director has authorised.
To ensure that all orders are recorded completely
and accurately.
To ensure that goods are despatched correctly to
customers and are of an adequate quality.
Top tips: Six tests of controls and six objectives such as those shown above were enough to gain the 12
marks available. However other valid tests and objectives you may have come with are shown below.
Test of control
With the client's permission, attempt to enter a sales
order which will take a customer over the agreed
credit limit and ensure the order is rejected as
expected.
Attempt to process an order with a sales discount for
a customer not normally entitled to discounts to
assess the application controls.
Observe the sales order clerk processing orders and
look for proof that the order acceptance is
automatically generated (eg email in sent folder)
Inspect a sample of GDNs and agree that a valid sales
invoice has been correctly raised.
Review the latest report from the computer sequence
check of sales invoices for omissions and establish the
action taken in respect of any omissions found.
Test objective
To ensure that goods are not supplied to poor
credit risks.
To ensure that sales discounts are only provided
to valid customers.
To ensure that all orders are recorded completely
and accurately.
To ensure that all goods despatched are correctly
invoiced.
To ensure completeness of income for goods
despatched.
(b)
Substantive procedures to confirm Tinkerbell's year-end receivables balance
– Circularise trade receivables for a representative sample of the year-end balances. If authorised by
Tinkerbell's management, send an e-mail or reminder letter to follow up non-responses.
– Review cash receipts after the year-end in respect of pre year-end receivable balances to establish if
anything is still outstanding. Where amounts are unpaid investigate whether an allowance is needed.
– Review the reconciliation of the receivables ledger control account (sales ledger control account) to
the list of receivables (sales ledger) balances and investigate unusual reconciling items.
– Review the aged receivables report to identify any old balances and discuss the probability of
recovery with the credit controller to assess the need for an allowance.
– Calculate average receivable days and compare this to prior year and expectations, investigating any
significant differences.
124 Answers