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a) Outline six matters that should be checked while vouching a sales invoice. b) As the audit assistant in XYZ Ltd., identify six procedures that you...

      

a) Outline six matters that should be checked while vouching a sales invoice.
b) As the audit assistant in XYZ Ltd., identify six procedures that you would carry out to
verify payments from petty cash.
c) Accounting and internal control systems cannot provide management with conclusive
evidence that objectives are reached because of their inherent limitations.
With reference to the above statement, discuss four inherent limitations of accounting and
internal control systems.

  

Answers


Kavungya
(a) The following matters should be checked while vouching a sales invoice
- That the date of the invoice fall's within the accounting period.
- That the invoice is made out in the name of the client and that the debtor exists among the
list of debtors.
- That the Debtor's account had been debited with the full amount of the invoice.
- That the goods sold are those that are regularly dealt in by the concern(nature of
transaction)
- That the cost of sales has been credited to an appropriate nominal account or accounts.
- Ensure that the invoice numbers are sequential.
- Reconfirming that the totals were correctly computed.
- Authorisation of transaction

(b) Payment from petty cash should be, verified as follow;-
- Trace the amounts advanced to the petty cashier for meeting petty expenses from the cash
book into the petty cash hook.
- Vouch payments with support vouchers which must be supported, wherever possible by
external evidence.
- Check authorisation of reimbursements.
- Ensure where a columnar petty cash book is maintained that the extension have been
carried forward into appropriate amount columns.
- Check the column totals and cross totals and the dates_
- Verify the cash balance in hand.
- Trace posting of the various columns in which payments are classified to the respective
ledger accounts.
- Verify whether the amount of petty cash imprest is fixed. Whether the fixed amount is
reasonable considering the total amount of petty cash payments made during a month or
so.

(c) Inherent limitations in accounting and, internal control systems as per ISA 400: Risk
assessments and internal control are:
- Management's usual requirement that the cost of internal control does not exceed the
expected benefits to be derived.
- Most internal controls tend to be directed at routine transactions rather than non-routine
transactions.
- The potential for human error due carelessness, distraction, mistakes of judgement and
the misunderstanding of instructions.
- The possibility of circumvention of internal controls brought the collusion of a member
of management or an employee with parties outside or inside the entity.
- The possibility that procedures may become inadequate due to changes in conditions, and
compliance with procedures may deteriorate.
- Overriding of controls by the management.
Kavungya answered the question on May 14, 2019 at 12:55


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