Sales - Recievables-Expenses-Cash and Bank - Inventory: Internal Control Evaluation Questionarre

INTERNAL CONTROL EVALUATION Prepared by:
QUESTIONARRE Date: December 7th, 2010
SALES -RECIEVABLES-EXPENSES-CASH AND BANK -INVENTORY

CLIENT: KSB
Reviewed By:
PERIOD: Date:
a) Control Objectives
b) Business consideration
c) The Checklist
a. CONTROL OBJECTIVES:
To ensure that
i. The sale of goods and services take place through proper process and
procedures.
ii. The sale is good and services are only done as to for the proper conduct
of business operations
iii. The invoices related to the sale of products are properly checked and
authorized.
iv. All transactions which are related to trade receivables (debtor notes and
adjustment etc) are properly and accurately recorded in the accounting
records.
v. Proper documentation provided for the incurring an expense of the

company. The Major expenditures are properly authorized and verified.
vi. The cash receipts are properly authorized and verified
vii. The position of the company is in accordance with the bank reconciliation
statement.
viii. Inventory is reordered through proper procedures

b. BUSINESS CONSIDERATIONS:
Key Points Effect on audit procedures and
on financial statements
i. Nature of the Company’s Auditor must be aware of the
Sales. nature of the company’s sales
ii. The existence of a sales As far as possible to be

Department. centralized.
iii. The nature of the company’s The auditor is aware of the

Expenses. expenses which are incurred
By the company.
iv. The banking practices by the The auditor is aware of the cash
Company and bank levels of the company.
v. the inventory level and suppliers the level of inventory should be

maintained according to the
given level.\
c. QUESTIONNAIRE
1. SALES
Comment Reference
1.1. Can Sales be made without authority
a) Quotations and credit approvals?
b) Whose authority in acceptance of order?
c) The segregation of duties in department?
d) Whose authority in the issuance of invoices?
e) The limit of issuance of invoices?
f) The policies of sending quotations?
g) Who negotiates the terms of sale?

1.2. Can debtors be specified without delivery
of goods.
a) Is the receipt good segregated from purchasing

Accounts payable and inventory?
b) Are all the good passed through stores?
c) GDN or equivalent prepared independently?
d) Adequate comparison with order, claims?
e) Invoices, GDN direct to accounts receivables not

sales
f) Documents cancelled to prevent re use?
g) Freight checked and bills matched to order?
h) Unmatched documents investigated properly?
1.3 Can cut-off error occur?
a) Time lapse from order to delivery?
b) Valuation of unmatched GDN?
c) Adequate control in recording?
1.4 Can invoices be wrongly allocated?
a) Normal ledger analysis?
b) Analysis independently checked?
c) Staff work controlled?
d) Independent and regular review?
1.5 Can sale recorded for good not ordered?

a) Goods received or sent without authority?
2. ACCOUNTS REVIEVABLES
2.1 Can profits be incurred but not recorded?
a) The profits matched periodically?
b) Invoice register?
c) Reconciliation with bank statement?
d) Credit balances controlled?
e) Monthly statements of receivables coincided?
3. EXPENSES:
3.1 Can Expenses be passed without authority?
a) Whose authority of preparation of Bill??
b) Whose authority in passing of a Bill?
c) The segregation of duties in department?
d) Whose authority in the issuance of major expenditure?
e) The limit level on amount of cash and cheque payments?
f) The policies or level of respective authority?
3.2 Can bills be passed without evidence?
i) Do all expenses are treated as a same flow procedure?
j) Are policies and requirements of evidence checked before passing bill?
k) Do cash payments and cheque payments are done separately?
l) Adequate justification and consideration given for major expenditure?
m) One document flow and approved to prevent mis-use?
n) Relevant supporting documents are checked properly?

3.3 Can cut-off error occur?
d) Proper Valuation of major expenditure?
e) Adequate control in recording?
3.4 Can expenses be wrongly charged?
e) Normal ledger analysis?
f) Expenses independently checked?
g) Staff work controlled?
h) Independent and regular review?
Follow this format

Don’t write objectives and business considerations
Start with questions…
“Questionnaire”
To visit the company and to know about its operations and proper control on
auditing, I made some bulk of questions that had helped me alot for proper
understating of the system, its transactions and main key features which are
important for audit of KSB Pumps. These bulks of questions prepared are
given below:
1. Tell about the company, its structure, its overall complex business and also its
diversity in different countries?
2. Brief history about the company, its major operations and huge businesses structure
in the world?
3. Do you think KSB Pumps is having a good Auditing department and it is working
effectively?
4. Tell different kinds of expenses being taken place on daily basis, monthly or on
yearly accounts. Describe their nature and treatment?
5. Are all expenses treated as a same flow and procedures?
6. IF not, then differentiate between expenses and their treatment in the flow?
7. Which documents are required to expense out all expenses?
8. Which main things the auditor would check in audit of expenses?
9. Do you think there is an effective Internal control System being applied on all
transactions, procedures and procurement?
10. What different testing procedures do you adopt for checking of fraud?
11. Tell about the structure of Audit department in KSB Pumps?
12. At which maximum level of transactions proper verification and authorization is
required?
13. Which expenses are expensed out as cash payment and which are treated on
cheque payments?
14. Differentiate between the documents flow for cash and cheque payments and their
approval level?
15. How many copies of documents are prepared and the flow to whom they are sent for
verification?
16. Are proper books of record being kept?
17. Whom signatures are required and of which level on passing of a bill?
18. What elements and key features you see of the bill to audit it when it is passed?
19. Tell about the proper flow of purchase of inventory and its documentation?
20. What entries are done and at which time to expense out the purchase of inventory?
21. Are salaries wages, markup, bad debts, gratuity .funds depreciation and rentals
treated as the same?
22. If not which documents differentiate all these and their flow as well the entries on the
system?
23. Describe if any weakness you found in the system?
24. Describe strengths of the system?
25. Do the current system COMET in your idea working effectively to control all
workings?
26. Are you going to apply SAP? If yes, then why?

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INTERNAL CONTROL EVALUATION Prepared by:

QUESTIONARRE Date: December 7th, 2010

SALES -RECIEVABLES-EXPENSES-CASH AND BANK -INVENTORY

v. Proper documentation provided for the incurring an expense of the

vi. The cash receipts are properly authorized and verified

viii. Inventory is reordered through proper procedures

ii. The existence of a sales As far as possible to be

iii. The nature of the company’s The auditor is aware of the

v. the inventory level and suppliers the level of inventory should be

a) Quotations and credit approvals?

b) Whose authority in acceptance of order?

c) The segregation of duties in department?

d) Whose authority in the issuance of invoices?

e) The limit of issuance of invoices?

f) The policies of sending quotations?

g) Who negotiates the terms of sale?

a) Is the receipt good segregated from purchasing

b) Are all the good passed through stores?

c) GDN or equivalent prepared independently?

d) Adequate comparison with order, claims?

e) Invoices, GDN direct to accounts receivables not

f) Documents cancelled to prevent re use?

g) Freight checked and bills matched to order?

h) Unmatched documents investigated properly?

1.3 Can cut-off error occur?

a) Time lapse from order to delivery?

b) Valuation of unmatched GDN?

c) Adequate control in recording?

1.4 Can invoices be wrongly allocated?

a) Normal ledger analysis?

b) Analysis independently checked?

c) Staff work controlled?

d) Independent and regular review?

1.5 Can sale recorded for good not ordered?

2.1 Can profits be incurred but not recorded?

a) The profits matched periodically?

c) Reconciliation with bank statement?

d) Credit balances controlled?

e) Monthly statements of receivables coincided?

3.1 Can Expenses be passed without authority?

a) Whose authority of preparation of Bill??

b) Whose authority in passing of a Bill?

c) The segregation of duties in department?

d) Whose authority in the issuance of major expenditure?

e) The limit level on amount of cash and cheque payments?

f) The policies or level of respective authority?

3.2 Can bills be passed without evidence?

i) Do all expenses are treated as a same flow procedure?

j) Are policies and requirements of evidence checked before passing bill?

k) Do cash payments and cheque payments are done separately?

l) Adequate justification and consideration given for major expenditure?

m) One document flow and approved to prevent mis-use?

n) Relevant supporting documents are checked properly?

d) Proper Valuation of major expenditure?

e) Adequate control in recording?

3.4 Can expenses be wrongly charged?

e) Normal ledger analysis?

f) Expenses independently checked?

g) Staff work controlled?