Page 89 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori
charting, revealing any weaknesses in the system. The questionnaire serves as a guide for studying a control
system through flow charts.
We may examine the flow-charting techniques for evaluation of internal controls on the sales and trade
receivables function. Let us assume that these are -
1. Order receiving function.
2. Dispatch function.
3. Billing function.
4. Accounting in the trade receivables’ ledger.
5. Main accounting functions in General Ledger.
6. Inventory recording function.
All these functions are carried out in distinct sections. As regards the Order Receiving Section, let us
further assume that the section receives orders:
Order Receipt: The Order Receiving Section receives orders through mail, by telephone, and from the
company's salesmen.
Sales Advices: Based on the received orders, the section raises internal "Sales advices", which are consecutively
numbered and entered in the order book with relevant details.
Order Filing: Orders from customers are temporarily filed in alphabetical order. Sales advices are prepared in
sets of four and sent to the dispatch section.
Dispatch Confirmation: After dispatching the goods, the dispatch section sends back the last copy of the sales
advice to the Order Receiving Section with the date of dispatch and quantity dispatched.
Order Fulfilment: If the dispatched quantity fulfils the order, the last copy of the sales advice is attached to the
customer's order and filed. If the order is only partly executed, the sales advice copy is kept in a temporary file.
Unfulfilled Orders: Periodically, the temporary file is checked for unfulfilled orders. If inventory is available,
the section initiates fresh sales advice for the unfulfilled part.
Salesmen's Uses Same Advice: The salesmen use the same advice form as the order receiving section.
Activity Flow in the Dispatch Section:
Receipt: Receipt of sales advices in sets of four.
Arrangement:
• Arranging the dispatch of materials.
• Logging the date of dispatch and quantities dispatched.
Initials: The head of the Dispatch Section initials the advices.
Distribution:
• First copy: Used as a packing slip with goods.
• Second copy: Sent to the Billing Department.
• Third copy: Accompanies the goods to the buyer and is used to obtain buyer’s acknowledgement upon
delivery. Then, it is received back and filed date-wise.
Return:
• Last copy: Returned to the Order Receiving Section.
Alternative Delivery:
• If goods aren't directly delivered to buyers and are sent via rail, road, or water transport:
• The copy forms the basis for the relevant forwarding note.
• This note helps in preparing R.R. (Railway Receipt) or equivalent documents for transport.
Activity Flow in the Billing Section:
Flow:
• Billing Section receives the second copy of Sales Advice.
• Accumulation of Sales Advice copies for 2-3 days.
Invoicing:
• Sales invoices prepared in sets of four.

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