Vouch or Trace:
Learn by doing projectrequiring students to prepare work papers
Work Paper 1
College Business Computerperformed by:Tad
Sales Collection cycledate: 9/17/18
Credit Sales transactions
nature of test Risk Assessment
objectiveThe objective of these procedure is to identify and assess the risk of material misstatement at the relevant assertion level through understanding College Business Computer's (CBC) client's internal control.
assertion(s)Occurrence, completeness, accuracy, classification and cutoff
procedureWalkthrough of a sales transaction.
Customers must complete a credit application before placing an order with CBC.
Customers whose credit has been approved place orders over the phone. Before completing the Sales Order, the sales associate checks the list of approved customers to make sure the customer has an account with CBC. If the customer has an account with CBC, the sales associate initiates a Sales Order. The sales associate obtains a purchase order from the customer, which they enter on the SO, along with quantity, and description of each product the customer is ordering. The associate verifies that the customer's address and ship to address on the list of approved customers is correct. The associate obtains prices from CBC's Price List, enters them on the SO, extends and totals the prices before quoting the price to the customer. Upon completing the SO, the associate enters their initials on the SO.
The associate takes the SO to the credit manager who check that the individual prices on the SO agree with CBC's Price List and that total for the SO is calculated correctly. The credit manager also checks the customer's outstanding receivable balance to ensure that the order does not exceed the customer's remaining credit limit. A copy of the SO is filed in the sales department alphabetically by the customer's name. CBC does not currently have a credit manager, so the sales manager is completing these steps.
The remaining copies of the SO are forwarded to the warehouse where a picker selects the items indicated on the SO and takes them to the shipping section of the warehouse. There a packer puts the items in the appropriate box or boxes for shipment. The packer initiates a Shipping Document using the SO number, order date and ship to address from the SO. The packer verifies that the quantities being shipped agree with the quantities on the SO. The packer then loads the box(es) on the truck and enters the date shipped on the SD. A copy of the SD is filed in the warehouse alphabetically by the customer's name.
This includes the date, the customer's name, address, the ship to address
BeforeEach entry was vouched to the related invoice. The date, customer name and amount from the sales journal were agreed to the invoice. The invoice was vouched to the related shipping document. The customer information, items sold and quantities on the invoice were agreed to the shipping document. The accounts receivable clerk’s initials were observed on the invoice indicating they agreed the customer information, quantities and date shipped on the invoice with the shipping document and also the prices on the invoice with the price list.
The shipping document and invoice were vouched to the related sales order. The customer information, items sold and quantities on the shipping document were agreed to the sales order. The shipping clerk’s initials were observed on the shipping document indicating they agreed the quantity on shipped with the sales order. The customer information, items sold, quantities and prices on the invoice were agreed to the sales order. The customer purchase order was observed on the sales order and the customer was agreed with the official list of pre-approved customers.
For example, invoice 6521 was selected from the sales journal. The date, customer name and sales total from the sales journal were agreed to the corresponding information on invoice 6521. Invoice 6521indicated the goods were made on shipping document 4971. From invoice 6521, the customer information, items sold and quantities were agreed to the shipping document. The shipping document indicated the order was placed on sales order 10151. The customer information, items sold and quantities on shipping document 4971 were agreed to the corresponding information on sales order 10151. The customer information, items sold, quantities and prices on invoice 6521 were agreed to sales order 10151.
Work Paper 3 shows the exceptions which were found in our sample.
conclusionBased on our sample results of credit sales transactions, the clients controls over occurrence, completeness, accuracy and cutoff do not support any reduction in our assessment of control risk. We will assess control risk as high regarding these four assertions and change our audit approach to primarily substantive.
Work Paper 1
College Business Computerperformed by:Tad
Sales Collection cycledate: 9/17/18
Credit Sales transactions
nature of testTest of Controls
objectiveThe objective of these procedure is to determine the effectiveness of controls over credit sales transactions.
assertion(s)Occurrence, completeness, accuracy and cutoff
procedureM&M LLP selected a sample of 10 entries from the sales journal.
Each entry was vouched to the related invoice. The date, customer name and amount from the sales journal were agreed to the invoice. The invoice was vouched to the related shipping document. The customer information, items sold and quantities on the invoice were agreed to the shipping document. The accounts receivable clerk’s initials were observed on the invoice indicating they agreed the customer information, quantities and date shipped on the invoice with the shipping document and also the prices on the invoice with the price list.
The shipping document and invoice were vouched to the related sales order. The customer information, items sold and quantities on the shipping document were agreed to the sales order. The shipping clerk’s initials were observed on the shipping document indicating they agreed the quantity on shipped with the sales order. The customer information, items sold, quantities and prices on the invoice were agreed to the sales order. The customer purchase order was observed on the sales order and the customer was agreed with the official list of pre-approved customers.
For example, invoice 6521 was selected from the sales journal. The date, customer name and sales total from the sales journal were agreed to the corresponding information on invoice 6521. Invoice 6521indicated the goods were made on shipping document 4971. From invoice 6521, the customer information, items sold and quantities were agreed to the shipping document. The shipping document indicated the order was placed on sales order 10151. The customer information, items sold and quantities on shipping document 4971 were agreed to the corresponding information on sales order 10151. The customer information, items sold, quantities and prices on invoice 6521 were agreed to sales order 10151.
Work Paper 3 shows the exceptions which were found in our sample.
conclusionBased on our sample results of credit sales transactions, the clients controls over occurrence, completeness, accuracy and cutoff do not support any reduction in our assessment of control risk. We will assess control risk as high regarding these four assertions and change our audit approach to primarily substantive.
1
Work Paper 2
College Business Computerperformed by:Tad
Sales Collection cycledate: 1/28/10
Sales
nature of testTests of Controls
objectiveThe objective of these procedure is to determine the effectiveness of controls over credit sales transactions.
assertion(s)Occurrence, completeness, accuracy and cutoff
1
Work Paper 3
College Business Computerperformed by:Tad
Sales Collection cycledate: 1/28/10
Sales
nature of testTest of Controls
objectiveThe objective of these procedure is to determine the effectiveness of controls over credit sales transactions.
assertion(s)Occurrence, completeness, accuracy and cutoff
1