OPERATIONAL AUDITING TASK Members: Adanza, Andrea Baje, Jewel AD Boaquiña, Honeymay Calagui, Mary Joy Escopete, Debbie Jane

1. Internal Control - Accounts Receivable and Credit Sales
Typical errors or irregularities include:
● Sales amounts recorded incorrectly
● Goods shipped but not billed to customer
● Goods billed to customer but not shipped
● Sales recorded in wrong accounting period
● Goods sold to customers who were bad credit risks
● Sales occurred that were not authorised
● Sales posted to wrong account
● Unauthorized write-offs of receivables may have occurred.
Internal Control Questionnaire
These questions are designed around the perfect sales system. If the control does
not exist then you tick ‘No’. The auditor then uses this information to identify
weaknesses in the current sales systemand relate them to what could go wrong in
the accounts.
“Can only approved customers be included in the sales
ledger?”
Yes No
1 Do all prospective customers undergo credit approval
procedures?

If so
2 Must a standard, signed, application form be submitted? 
3 Are two forms of identity obtained and details checked to
application form?

4 Are credit references obtained? 
5 Are credit limits set for all credit customers? 
6 Are credit limits reviewed:
every 3 months
where debtor days exceed 3 months
where the debtor balance exceeds 75% of the credit limit



7 Where a credit limit is set above £100 is this based on either a
recent set of published accounts or past transaction history?

8 Are all new account applications signed as authorised by the
Accounts Manager?

Continued...

2. “Can orders only be accepted for recognised customers
within their credit limit?”
Yes No
1 Are credit sales orders accepted only for approved customers
(on the sales ledger)

2 Are all orders checked against the current sales ledger
balance

3 Are all orders that take the balance to within 75% of the
credit limit passed to the sales manager for approval

4 Do all orders record an order approval reference number or
get signed by the credit controller

5 Is an aged debtor analysis prepared each month? 
6 Are systems of chasing letters/solicitors letters in place for all
balances outside of payment terms?

7 Are customers in default immediately put on stop? 
“Do all goods despatched result in a customer being
invoiced?”
Yes No
1 Are orders recorded on a pre-numbered sales order 
2 Are pre-numbered goods despatch notes raised for all goods
taken from stores?

3 Can a Goods despatched note (GDN) only be raised on the
basis of an approved sales order?

4 Are GDNs matched/retained with sales orders? 
5 Does someone independent of the warehouse check goods
leaving the premises with the related GDNs?

6 Do customers sign for all goods accepted? 
7 Are any queries agreed with the driver and recorded on the
GDN?

8 Do both parties sign the amendments to the GDN? 
9 Are signed GDNs/orders checked back in by the warehouse
and any changes approved?

10 Does the warehouse manager check the sequence of GDNs to
ensure all returned by the driver?

11 Are all GDNs passed to the sales ledger department? 
12 Are all invoices raised based on the GDN set? 
13 Is a copy of the GDN referenced to the sales invoice number
and filed in numerical order?

14 Does the accounts manager check the sequence of processed
GDNs each month?

15 Does the accounts manager check invoices for accuracy and
validity (based on approved sales order, GDN and price lists)

Continued...

3. “Are all invoices raised recorded in the sales ledger?” Yes No
1 Is the invoicing assistant a different person to the sales ledger
assistant?

2 Are invoices recorded in the sales day book in numerical order 
3 Does the accounts manager check the sequence of invoices
recorded in the sales day book, each month?

4 Are invoice sets filed in numerical order? 
5 Is the sales ledger assistant a different person to the invoicing
assistant?

6 Are the sales day book totals posted to the main ledger by the
Accounts Manager (as distinct from the sales ledger
assistant)?

7 Is sales ledger control account reconciliation performed by
the accounts manager every month?

8 Are statements issued monthly to active sales ledger
accounts?

9 Is the statement run checked against the list of balances by
the accounts manager?

“Can items in the sales ledger only be cleared by valid
payment, credit note or journal entry?”
Yes No
1 Are all credit notes approved by the sales manager? 
2 Does the accounts manager review all material credit notes
issued during the month?

3 Can journal entries only be entered by the Accounts
Manager?

4 Are cash receipts posted from the cash book each month 
5 Is sales ledger control account reconciliation performed by
the accounts manager every month?

Continued...

4. “Is all cash received correctly identified, recorded, posted
and promptly banked?”
Yes No
1 Is all cash received in the post recorded immediately into a
cash diary, to which it is cross referenced?

2 Do at least two people open the post? 
3 Is all cash received then passed immediately to the cashier,
intact?

4 Is the cash receipts book written up by the cashier before
lunch each day?

5 Is cash banked daily? 
6 Is cash banked intact? 
7 Is the time and route of the daily banking varied each day? 
8 Is proper insurance held to cover loss on the premises or in
transit?

9 Is fidelity insurance in place for all staff? 
10 Is all cash retained on site kept in a locked safe? 
11 Does the accounts manager check a sample of the cash diary
daily takings to the cash book?

12 Is the cash book posted to the sales ledger by someone
different to the cashier?
