Page 64 - Auditinf Electronic System

a. Credit Memo: indicates a reduction in amount due from a customer
due to him returning goods or given an allowance

b. Sales returns and allowances journal: a journal used to record sales returns
and allowances.

7. Write off uncollectible accounts receivable:

a. uncollectible accounts authorization form: is a document used internally to
indicate authority to write off an account receivable as uncollectible (This
transaction recorded in general journal

8. Estimate Bad debt Expense:

Companies cannot expect to collect 100 % of their sales, accounting standards
require them to record bad debt expense for the amount they do not expect to collect
at the end of the period (this transaction is recorded in general journal)

Second: Designing tests of controls and substantive tests of transactions for sales

1) Understand internal control of sales:
Auditor obtain understanding of clients internal control through:

▪ Study the client’s flowcharts.
▪ make inquiries of the client using an internal control questionnaire
▪ Perform walkthrough tests of sales transactions and procedures and

documents.

64 65
‫جميع الحقوق محفوظة ـ الإعتداء على حق المؤلف بالنسخ أو الطباعة يعرض فاعله للمسائلة القانونية‬