Your client, ABC Ltd. has a system for inputting purchase and expense invoice where the operator inputs the following from each item. Order number (a code 2221 is used for items like electricity) Supplier name Supplier code number First four letters of nominal account name (entered on invoice by purchase department manager) Nominal account code (entered by purchase department manager) Date Goods inward note number Net amount VAT amount Gross amount Required: Suggest manual operation and controls which might previously have applied to these invoices

Manual operations and controls that might have been applied to this invoice are:

1. A proper system for the preparation of invoices:

– Independent preparation – invoices should have been prepared and sales journals entered up (or invoices summarized, where journals were not kept) by a section separate from the sales ledger sections. This section should also have been separate from the dispatch of goods and cash collection.
– Sales prices of goods should be authorized in writing. A responsible official, who should have been independent of the accounts department, should authorize discount and special terms.
i. Controls to ensure that all invoices and credit notes are entered in the books.

– Pre numbering invoices – invoices and credit notes should have been pre-numbered and filed, after entry in the books in numerical order.
– The processed invoice should have been received and any missing numbers investigated. A responsible official independent of the sales ledger & cash receipts personnel should have authorized any spoilt, cancelled or altered invoice.
ii. A control to ensure that all authorized transactions are recorded in the sales ledger.
– Authorized invoices should be pre-listed determining a total for posting to an independent control account, before the ledger personnel process them. The totals of the ledger posting runs (both nominal and personal account) should have been agreed back to the control account



Share through

Leave a Reply

Your email address will not be published. Required fields are marked *