You are the senior auditor of Richardson’s, and you are auditing the sales and receivables area of Clarkson Ltd, a water filter manufacturer, for the…

You are the senior auditor of Richardson’s, and you are auditing the sales and receivables area of Clarkson Ltd, a water filter manufacturer, for the year ending 30 December 2016. The following procedures have been identified.

  • All sales are made on credit, with outstanding accounts due and payable within 30 days. Customers can purchase the water filters from Clarkson by emailing or telephoning through their purchase order. Immediately on receipt of a customer’s request, a sales clerk prepares a sales order.
  • Sales orders are manually pre-numbered and produced in triplicate. One copy of the sales order is sent to the shipping department, one to the invoicing department and one copy is filed in the sales department.
  • On receipt of the sales order by the shipping department, the shipping clerk obtains the items from the warehouse, packages them, prepares a shipping note and arranges transport.
  • Shipping notes are also manually pre-numbered and produced in duplicate. The original shipping note is sent to the invoicing department, and the second copy is filed by the shipping clerk.
  • The shipping clerk transfers the information from the shipping note to a delivery docket, which is pre-numbered and produced in triplicate. Two copies of the delivery docket are given to the carrier. One of these is retained by the customer, while the other is signed by the customer and retained by the carrier. The shipping clerk forwards the third copy of the delivery docket to the invoicing department.
  • A clerk in the invoicing department checks that the information on the purchase order, the shipping note and the delivery docket match each other and then prepares the sales invoice. Sales invoices are pre-numbered and produced in triplicate. One copy of the sales invoice is sent to the customer, one is forwarded to the accounting department, and the third is filed by the invoicing clerk.
  • The accounts clerk uses the invoice to make an entry to the sales journal, which is used to update the sales ledger and the accounts receivable subsidiary ledgers. The sales invoice is then filed by customer name.
  • All payments are made by cheque and mailed to Clarkson along with the remittance advice. Two staff are assigned to receive these payments – one who opens the mail and records the receipt of the payment on a cheque list. The other staff member takes custody of the cheques and matches them to the remittance advice, then forwards them to the accounts receivable clerk.
  • The accounts receivable clerk updates the subsidiary ledger.
  • Bank reconciliations are performed monthly by an accounting clerk, who is not responsible for receiving payments.
  • Sales returns and allowances only are processed after the financial controller has authorised them.
  • Bad debts are written-off only on the authorisation of the financial controller, after discussion with the credit manager.

Required

(a)  Identify three (3) internal control activities in Clarkson’s sales and receivables, and explain if the control activity prevents or detects material misstatements, and how this is achieved.

(b)  For each of the controls identified in (a) provide one (1) test of control that could be undertaken to verify the effectiveness of the control. Justify your answer.

(c)   Identify and explain three (3) internal control weaknesses in Clarkson’s sales and receivables processing system.

(d)  For each of the weaknesses in (b) identify one account balance at risk of misstatement and the assertion at risk. Justify your answer.

(e)  Select two (2) of the weaknesses identify in (c) and explain one improvement to controls that could be implemented for each, to reduce the risk of material misstatements.

Show more

Calculate Your Essay Price
(550 words)

Approximate price: $22

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more