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1. Pear’s retail customers undergo credit checks prior to being accepted and credit limits are set accordingly by a sales manager.
Why is it not a control deficiency and instead a direct control when the credit limits are not reviewed
2. Sales invoices are raised by the accounts department using goods dispatched notes.
Why this is not a control deficiency and instead a direct control as the accounts department should use both sales orders and goods dispatched notes
1. Is a control (as opposed to selling goods on credit to anyone without credit checks).
There would be a deficiency if junior staff set credit limits and they were not reviewed, but a sales manager is in a position of authority – and not every single thing they do has to be scrutinised.2. Because revenue recognition is based on transfer of control/i.e. dispatch of goods. If customer ordered 20 items but only 10 were dispatched (because that was all that was available), raising an invoice for 10 items would be correct.
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