SALES AND PURCHASES

Sales

The audit objective is to ensure that sales invoices are properly authorised,
recorded in the books of accounts to avoid understatement or overstatement of
sales, and delivery made to customers.
The following substantive procedures may be applied:
(a) Verify sales with customer orders;
(b) Check that invoices are properly authorised;
(c) Check price charged with official price list;
(d) Check entries in sales day book with invoices and credit notes;
(e) Verify that the functions of recording sales, maintaining customer
accounts, and preparing statements are well segregated;
(f) Match sales invoices with dispatch notes;
(g) Check that all sales invoices are recorded;
(h) Match cash receipts with invoices;
(i) Verify that sales returns and adjustments are properly recorded and
authorised;
(j) Verify that there are proper cut-off procedures and duly complied with;
(k) Verify that there are proper safeguards to ensure that debtors statements
cannot be altered before despatch;
(l) Verify that writing-off of bad debts are properly authorised;
(m) Trace sales invoices to summaries;
(n) Check summary totals to sales ledger control accounts; and
(o) Check additions in the sales ledger control accounts.

Purchases

The audit objective is to ensure that all purchases are accounted for, authorised
and properly presented. The auditor should adopt the following procedures:
(a) Randomly select a number of invoices and credit notes for detailed
checking;
(b) Obtain specimen signatures of all officials authorised to approve
purchases;
(c) Compile a schedule of the items selected and also the test to be applied;
(d) Verify that each invoice is supported by a properly signed requisition;
(e) Verify that each invoice is supported by an authorised copy order;
(f) Verify that each invoice is backed by a goods received notes as evidence
of delivery;
(g) Verify that prices are authorised by the appropriate signatories;
(h) Recompute the entries in the invoice;
(i) Check calculations, extensions, and additions;
(j) Check that invoices are correctly coded for ledger accounts classification;
(k) Verify that appropriate acknowledgments such as initials or signatures
appear on each purchase document;
(l) Verify that each correct invoice has been passed for payment;
(m) Check that each invoice is entered in the invoice register;
(n) Check that each invoice has been posted to the purchase ledger account;
(o) Check for completeness of purchase orders by enquiring into missing
numbers;
(p) Investigate outstanding orders;
(q) Enquire into unmarked Goods Received notes;
(r) Enquire into unprocessed invoices;
(s) Check additions of invoice register; and
(t) Agree invoice register total with purchases total account.

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