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KPMG: The Internal Controls Practical Guide
Finance & Accounting
Pages 6 (1506 words)
Based on the flowchart depicted, Office Supplies Ltd has divided the activities involved in the sales cycle among four units i.e. order entry, shipping, invoicing and accounting. The key controls that could be relied on for these four divisions are discussed in this paper…
Order Entry – In order to test the existence of the order, the key control that needs to primarily be relied upon is the source document which has been used as evidence of the placement of order by the customer. In this scenario it could be a telephonic conversation, a faxed or emailed request, or a signed order received from the customer. Since the flowchart depicts the preparation of the sales order as a manual procedure, the second key control that needs to be assessed is whether the company follows a four-eye principle when it comes to processing documents such as sales orders. Supervisory control is vital in ensuring that sales orders have been reviewed by two parties at the very least. According to the KPMG guide for internal controls, it is important that an organization adopt a culture where internal control is inherent in terms of accountability and operations, to ensure effectiveness of controls (Stock 1999, 24).
Shipping – In order to determine the occurrence of the shipment, the key area of control that could be relied on is the bill of lading. A bill of lading would act as a legal contract between Office Supplies Ltd and the carrier of goods (Lawyers and Legal Services Australia 2011) and will suffice as evidence that the shipment has been effected as per the sales order. ...
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