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a) Explain the potential errors that could occur in the processing of sales transactions. b) Highlight four preventive measures that could be put in place for...

      

a) Explain the potential errors that could occur in the processing of sales transactions.
b) Highlight four preventive measures that could be put in place for the areas you have
identified in (a) above.
c) Identify three examples of discrepancies in the accounting records that could indicate
the possibility of fraud.

  

Answers


Kavungya
I. Potential errors in the processing of sales transactions:-
• Good's dispatched to customers without being invoiced. Services rendered without being
invoiced.
• Good's being sent to bad credit risk customers. In other words. customers who have a
history of not honoring their credit obligations.
• invoicing errors whereby sales are invoiced but not recorded in the books_
• Receipt of cash or cheques not being recorded in the books.
• Unauthorized crediting of debtors account.

2. Preventive measures:
• Sales orders should be pre-numbered so as to initiate audit trail, and minimise dispute
with customers.
• Sales orders should be approved by the credit department which will also assess the
credit worthiness of the customer.
• Matching of all delivery and dispatch notes by an independent clerk.
• Checking invoices for arithmetic accuracy, pricing discounts allowed and so forth.
• Use pre-numbered sales invoices and issue invoices in sequence.
• Establish credit control department to examine orders, review long outstanding debts
and investigate and follow up late payments:

3. Examples of discrepancies in the: accounting records, that could indicate the possibility
of fraud.-
• Transactions that, are not recorded in a, compete or timely manner or are improperlyrecorded
as to 'amount accounting period, classification or entity, policy.
• Unsupported or un-authorised balances or transactions.
• Last-minute adjustments that significantly affect financial results
• Evidence of employees' access to systems and records inconsistent with that necessary to
perform their authorised duties.
• Tips or complaints to the auditor about alleged fraud.

Kavungya answered the question on May 14, 2019 at 13:13


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