Acca aa s21 Notes

Control objectives:
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Orders are accepted from credit-worth customers only
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The ordered goods are promptly dispatched
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The goods are received by customers
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All deliveries are invoiced promptly and accurately
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Invoices are entered properly into the receivables ledger
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Payment is received when due
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Receipts from customers are accurately recorded
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Credit control procedures target long-outstanding receivables
It should be possible to trace from order through to cash account entry and from cash account entries 
back to orders and dispatch notes.
3. The payroll system
‘Watertight’ audit trail required
New employees
Wages/salaries and deductions
Leavers
Control objectives:
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Employees are hired only as necessary
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Employees are paid correct rates
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Hours worked are accurately recorded
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Overtime is authorised
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Net pay and deductions are accurately calculated
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Payments are made correctly to employees, the government and others, on a timely basis
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Employees leaving are promptly removed form the wages system
September 2021 to June 2022 exams
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4. The inventory system
Receive goods
Store goods
Despatch goods
Clearly there is an overlap here with the purchases and sales systems. As well as ensuring that, for 
example, damaged goods are not received into inventory, controls should ensure that:
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Goods cannot be misappropriated (ie stolen)
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Goods cannot be damaged (ie conditions of storage are suitable)
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Obsolete or slow-moving items can be identified (because they will need to be written down)
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Goods are only despatched with approval
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Inventory records are complete and accurate
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A correct ‘cut-off’ is established at the year end (this is covered later in Chapter 20).
For a manufacturer, the inventory system would also include the process of converting raw materials 
into finished goods. In this case there would need to be controls over the transfer of raw materials 
from stores to the factory and there would be overlap with the payroll system (as labour cost would 
be included in the cost of production).