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ABC suppliers employs 100 salesman ,each of whom covers a different area and is supplied with a car.At the end of each week each salesman submits an expense claim on pre-printed form with supporting vouchers attached.Expenditure is on fuel together with invoices for hotel accommodation,meal,and entertaining.
Each claim is scrutinised by assistant accountant.He raises any queries with the salesman concerned and make out cheques for signature by 2 directors.The amount of salesman’s expenses paid out annually is material to the financial statements.Required
(a)Discuss the shortcomings of this system and suggest ways in which it could be improved.
(b)List the tests of control that the auditor might perform on this system.Claims should be checked for arithmetic accuracy
The directors should see supporting documentation
Claims and documentation should be cancelled once paid
Sales manager should approve the claims (how else do we know if the sales reps’ activities are ok?)You will have to do (b) yourself.
Should review the vouchers which is given by the sales man whether it is authorized by the chargeable person such as fuel voucher, hotel accommodation, meal and entertaining
Verify the distance which, the sales man has gone through to supply the goods via car and estimate the through destination and fuel expenses which is incurred by the salesman to the client place.
The auditor should review the customer order which took place in the GDN and got through whether the client has sign the good deliver notes to ensure that the goods has sent correctly as what the client has ordered.
Match the amount that stated in the particular invoices and any trade discounts took place during sales mode. Recheck whether the cash that summit to the chargeable person in the company is match with the invoice or not in order to made the transaction accurately,
The auditor should verify the details of the sales which is made by the salesman/goods dispatched notes with solve invoice to check the quantities, price charge to the customer, trade discounts which have been deducted and etc.
Meanwhile the auditor should review the posting to sales ledger control account and sales ledger to enforce the amount is correctly recorded in the transactions.
Hence the auditor may inspect reconciliation of control account to sales ledger between in order to reduce the risk of misstatement.Are the answer okay?
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