ACCA F8 - Audit and Assurance Revision Kit 2016

(c)
Marks
– To ensure all goods dispatched are correctly invoiced
– To ensure completeness of income for goods dispatched
– To ensure sales discounts are only provided to valid customers 2
Up to 1 mark per well explained deficiency and up to 1 mark for each control.
Overall max of 6 marks for deficiencies and 6 marks for controls.
– Inventory not checked when order taken
– Orders not completed on pre-printed order forms
– Order forms not sequentially numbered
– Credit limits being exceeded
– Goods dispatched not agreed to order to check quantity and quality
– Signed dispatch notes not being sent to accounts department
– Sales invoices being raised by inexperienced staff
– Sales discounts manually entered by sales clerks 12 12
20
(a)
Documenting the sales and dispatch system
Narrative notes are written descriptions of the system, describing how the system processes each
transaction, and the controls that operate at each stage.
Advantages
Simple to record
No training required to document and understand; easily understood by all members of the internal
audit team
Disadvantages
Cumbersome, especially if the sales and dispatch system is complex
Not easily updated from year on year if it is not computerised
More difficult for users to quickly identify internal control deficiencies
Flowcharts are graphical illustrations of the physical flow of information through the sales and dispatch
system.
Advantages
After some experience, they can be prepared quickly
Information is prepared in standard form, so it is easy to follow. Deficiencies in internal control can
also be quickly identified
Ensures that the system is recorded in its entirety; any loose ends are easily identified
Disadvantages
While appropriate for standard systems, unusual transactions cannot be captured without the use of
additional narrative
Time-consuming to amend as redrawing is required.
Questionnaires comprise a list of standard questions. Internal control questionnaires (ICQs) determine
whether desirable controls are present, while internal control evaluation questionnaires (ICEQs) assess
whether specific errors (or frauds) are possible at each stage of the sales and dispatch cycle.
Advantages
If drafted thoroughly, they can ensure that all controls are considered
Quick and easy to prepare
Easy to use and control
ICEQs are effective in identifying internal control deficiencies
Mock exam 2: answers 233