Checklist for Sales, Services and Revenue under Internal Audit
Objective of Checklist for Sales, Services and Revenue:
The overall objective of the internal audit of sales, services and revenue is to ensure and determine whether the information regarding the same have presented in the financial statements in a fair and true manner or not. To make sure that a detailed audit of this department is done accurately a checklist for sales, services and revenue is prepared by the auditor. It contains the necessary and mandated checkpoints, so that every single aspect is checked and covered during the audit.
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Checklist for Sales, Services and Revenue:
The important checkpoints in the checklist for sales, services and revenue are given as followed-
1. Documentation: An Audit Documentation has to be prepared by the auditor on time. It must provide with the following-
(a) It must appropriately and sufficiently record the basis on which the audit report has been made.
(b) It should serve as an evidence that the performed Internal audit service was in accordance with the Standards on Internal Auditing, Standards on Accounting (SAs) and other mandatory compliances.
2. Legal compliance: It is the duty of the Internal Auditor to ensure that the prescribed compliances and regulations are been completed by the company. For this they also have to collect the documentary proofs to support the claim. These proofs can be anything from paid tax receipts to invoices to registration documents, etc.
3. Authorisation Matrix: An accurately documented authorization matrix is desirable and required while following the checklist for sales, services and revenue. It must be recommended during an audit. At the time of vouching the auditor must check the Compliance with authorization matrix.
4. Compliance with Accounting Standards and Standards on Auditing: Another important point in the checklist for sales, services and Revenue is
To check and ensure the compliance with following Accounting Standards (AS) as under-
(i) AS 1: Disclosure of Accounting Policies
(ii) AS 2: Valuation of Inventories
(iii) AS 11: The Effects of Changes in Foreign Exchange Rates
(iv) AS 9: Revenue Recognition
(v) AS 12: Accounting for Government Grants
(vi) AS 18: Related Party Disclosures
To ensure the Compliance of the following Standards on Auditing (SAs) as under-
(i) SA 230: Audit Documentation
(ii) SA 240: The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements
(iii) SA 330: The Auditor’s Responses to Assessed Risks
(iv) SA 550: Related Parties
(v) SA 265: Communicating Deficiencies in Internal Control to Those Charged with Governance and Management.
To ensure Compliance of following Standards on Internal Audit (SIAs) as under-
(i) SIA 18 Related Parts and provisions.
5. Procedures/ Controls Credit Assessment: The internal auditor must perform the credit assessment in order to check in depth the policies and methods and procedures used in the company and its departments.
6. Sales and Dispatch: It is a mandatory checkpoint in the Checklist for Sales, Services and Revenue to properly check and analyse all the sales transactions and dispatches made by the company.
7. Reconciliation: In order to check reconciliation, the internal auditor must perform the following steps-
(i) He must reconcile the general ledger and the debtors ageing report.
(ii) He must take confirmations independently for the account balance of the customer.
(iii) An overall reconciliation of major raw materials, finished goods, billing, debtors, realisations, write-offs must be done.
8. Segregation of Duties: Segregation of duties must be there between the functions like Sales, Dispatch, Credit control, Credit notes, Collections and Adjustments in an organization.
9. IT Controls: IT control is a mandatory point in the checklist for sales, services and revenue. The Internal Auditor while providing Internal Audit Services must ensure that all the information and technology systems used for providing services and for sales and revenue are working finely and as per the requirement. Also, whether they are updated or not must also be ensured.
10. Recording of Transactions: The transactions that were recorded by the company in a financial year must be checked by the auditor to ensure its validity and true and fairness for future purposes.
11. Reporting: Reporting is an integral part of internal audit. As this is the part where the auditors must prepare an audit report and submit the same to the management. The audit report is a detailed summarization, analysation and interpretation of the findings during the audit. This information can be really useful for the company for its growth and development.
12. Good Governance: The internal auditor as part of the checklist for sales, services and revenue must check the following information-
(i) Whether a monthly or annual sales plan is available in the company.
(ii) Whether the entity had monthly review meetings. Also, it must be ensured that where variance between the planned meeting to actual meeting have been properly discussed and documented or not. He must also check that a proper action plan has been prepared to close the gap.
(iii) Whether audits have been undertaken quarterly for improving the systems.
Suggestions and recommendations if any: The auditors can make suggestions and recommendations as he may find important in order to improve the internal controls and management of the company.