• Noted that items highlighted was key idea to identify controls of the Company, then auditors

would link which control relating to which risk correspondingly.

XYZ Company

General information
XYZ Co. has … key product lines: (Medical company)
XYZ Co. significantly sells products to market by way of Pharmacy, Pharmaceutical company, Hospital
(bidding) and export.
The company’s products have been exported to markets around Asia for example …

Type of sales:
+ Direct Local sales: OTC (Over the counter): thuốc bán không cần toa bác sĩ, kênh bán lẻ của
các nhà thuốc, cty dược, phòng khám, ETC (Ethical drug): thuốc bán theo toa bác sỹ (prescription
drug) kênh đấu thầu của bv qua BHYT.
+ Export sales.

Finished goods warehouse:

Customer: divided in 4 groups

+ Pharmacy - OTC
+ Pharmaceutical Company - OTC
+ Hospital (bidding) - ETC
+ Export channel

Payment term:
ETC: tùy hồ sơ thầu: 90, 120, 150, 220 days
OTC: 30, 45, 65 days

Pharmacy: Payment term maximum 30 days (No consignment case)

Pharmaceutical company: Credit term: 60 days
Hospital and export channel: Credit term is specific for each customer, is agreed by two parties in
contract. (90, 120, 150, 220 days)

The sales of pharmaceutical company, hospital and export channel are recorded the amount of
invoices which are actual delivered.

Credit limit:
OTC: Credit limit for the first time: 3mil VND, after that, based on the customer’s demand of buying the
product greater than 3mil VND, each branch CA and Director prepares Credit limit approval form (Đề
nghị tăng hạn mức công nợ và xuất nợ quá hạn), and send to CA and GD for approval.
ETC and export: Credit limit is specific for each customer, which is agreed by two parties in contract,
which is signed by GD.

WCGW: R&O-Sale to unauthorized customer, unrecoverable receivables.

Control 1: Credit limit for each customer is reviewed and approved by General Director.

New customer evaluation and selling price changes

New customer:
For new customer of OTC channel, XYZ have Pharmaceutical Sales Representative – Trình dược
viên (PSR) will survey the potential distributor, depend on the area, demand.

When PSR find a new customer, they record the customer’s information in X system application, which
would be transferred automatically to ERP system as customer master file. After having information of
new customer, Customer care department will prepare contract, which is signed by customer and
branch director.

All new customers have 3mil credit limit when signing contract. When the demand increases, Branch’s
Director will prepare Credit limit approval form (Đề nghị tăng hạn mức công nợ và xuất nợ quá hạn)
and send to CA and GD for review and approval. Each Branch is responsible for its customers.

For new customer of ETC channel, Branch’s Director reviews information about bidding package, if it
is considered that suitable with current stock situation, sale staff will purchase Bids document and
transfer Bids document to Domestic Sale Department to fulfill the requirement. Then sent to Branch
Director for approvals. If XYZ is successful bidder, hospital will send contract, price list, etc. to DMC,
Branch director and Sale Department finalized the contract with third party, the contract then is signed
by Branch director.

For new customer of Export, International sale department of Head office is responsible for finding
customers. After evaluating customer based on their equity, revenue, operation status, the sale staff
will propose the new customer to GD for approval. Then, the sale contract (type of principle contract) is
prepared and signed by GD. Principal contract included the information term of delivery, term of selling
price, the policy of discount, rebate.

WCGW: R&O-Sale to unauthorized customer, unrecoverable receivables.

Control 2: Sale contract was reviewed and signed off by Branch’s Director for OTC channel and
ETC channel or General director for Export.

Information about new customer such as code, name, address…is imported to system ERP by PSR
through X system or by accountant. Noted that customer’s code is numerical and cannot import the
code which is existed.

WCGR: Fictitious/duplicate sales are recorded

Control 3: System prevents the duplicate customer’s code. => IT application control

All master file on X system and ERP cannot be modified by anyone, just only IT department have right
to update or modify. If there are any changes in customer information, each branch obtain supporting
document (change name, address,…) and send to IT for updating.

Selling price and discount policy for all distributors are the same at a point of time, so new customer of
XYZ Co. should be following that policy. With the hospital channel will be under the agreement when
the bid.

WCGW: Fictitious/duplicate sales are recorded

Control 4: Only IT have authorized to update or modify master data related to price, customer

Selling price:
Selling price for OTC channel was updated to X system by IT department after being prepared by Sale
department and approved by Chief accountant and General Director.
Selling price will be revised when Domestic Sale Dept recognize there is a change significantly in the
price of raw material. Selling price will be reviewed and approved by CA and GD. Head of sale
department and CA have authorization to publishing the selling price.

WCGW: Sales are made with unapproved selling price

Control 5: Selling price will be approved by CA and GD before updating to the system

Note: As CA, after IT updated selling price to system, sale staff will cross check the selling price in the
system again. However, there is no document for this activity.

Initiation
OTC channel and ETC channel:

Normally, Pharmacy and Pharmaceutical company call or email to PSR for goods order.
Then, PSR records sale order for customer on X system add-in in a tablet. X system only performs the
order entry, interface the information from the ERP to show PSR such as the number of inventories,
original price, unit price, actual quantity (if any).

Recording & Processing

After receiving sale order from PSR on X system, admin staff (nhân viên nghiệp vu chi nhánh) reviews
the stock on hand in ERP and discuss with warehouse if stock is not available for sale order, Admin
staff will discuss with customer, and manage to switch between products if stock are not available at
the delivery day.

After meet requirement of stock on hand, sale order is reviewed credit limit, if sale order is exceeded
credit limit. ERP does not allow to process sale order. At this step, admin staff will prepare Credit limit
approval form for this customer and send this form to Branch’s CA, Director and CA, GD for approval.

WCGW: Fictitious/duplicate sales are recorded

Control 6: Credit limit of each customer is reviewed by admin staff before processing sale order

PSR can follow up the process sale in and sale out of each Pharmacy and Pharmaceutical company in
X system. So, Company can know that the actual sale to market. Because Company also has some
policies for sale support distributors selling to customers. So, XYZ Co. needs to follow up actual sale
out.

If there are any changes to Sale orders that have not yet been submitted to ERP, PSR can modify inX
system.
Sale orders list is tracked on X system by admin staff of each Branch.

When sale order meets the requirement of stock and credit limit, admin staff presses “Process SO” to
continue processed SO to ERP system. In ERP, admin staff divided products as tax rate to billing. After
that, admin staff process to issue invoice, which must be signed by authorized person. It is noted that
item on Invoice (Billing field in ERP) such as price, amount… still can be modified before invoice is
signed by authorized person.
Invoices are printed from ERP. XYZ Co. now used electronic invoice, therefore, Branch authorized
person must approve it on the system. After that, there will be a copy of signed invoice transferred to
warehouse.

WCGW: C,M-Invoice misstates the quantity of goods shipped.

Control 7: Invoice was interfaced directly to HO when admin staff press "Process SO". Item on
Invoice, (Billing field in ERP) such as price, amount… can't be modified after invoice was
signed by authorized person. => IT application control

Delivery term: at pointed place or the warehouse of customers, cut-off test should be considered.
Almost goods are delivery to customer directly by XYZ Co.’s team.

When receiving signed invoice, warehouse keeper reviews the actual inventory, then, prepares Goods
Delivery note and transfer to Delivery man. At the gate, the security records the No of cars, No of SOs.

After received goods, customer signs off on Delivery tracking note, which is stored at each Branch’s
sale division.

WCGW: C,M-Invoice misstates the quantity of goods shipped.

Control 8: Delivery tracking note is signed by customer to confirm the actual goods received.

At the end of each month, each Branch and HO Production department, Accounting perform three-way
matching between sale report, internal invoice of head office and invoice request (bảng đề nghị xuất
hóa đơn) from Branch to cross check revenue with Head office. The invoice request is prepared by
Branch staff and approved by Branch director.

WCGW: Fictitious/duplicate sales are recorded

Control 9: Monthly, Branch, Production department and Head office accountant perform three-
way matching between sale report, internal invoice of head office and invoice request from
Branch.

Discount, promotion, Selling policy of BBC:

Discount of XYZ Co. mainly incur to Pharmacy and Pharmaceutical company:
Selling policy is prepared by each branch, then send to CA and GD for approval.
- Discount with Pharmaceutical company: Depend on each customer. XYZ Co. will make agreement
in contract, so each customer has each separate discount policy.
- Discount with Pharmacy: trade discount and payment discount.

Chính sách chiết khấu:

1 Chiết khấu trên HD giảm trừ trực tiếp trên HĐ theo Danh mục
giảm trừ trên HĐ liền kề khi đạt mức doanh số thưởng (nếu giảm trừ trên HĐ ghi
2 Chiết khấu đạt doanh số 521, nếu chi tiền mặt -> ghi 641)
3 Chiết khấu ký Hợp đồng hình thức chi trả giống CK đạt doanh thu, khi khách hàng hoàn thành Hợp đồng

WCGW: Sales discounts are incorrectly recorded.

Control 10: Discount amount must be updated and approved by authorised person.

Sale return:
Sale return is mainly due to Finish goods change packages, broken, …
Accounting department will receive documentation from the customers, such as Invoice issued by
customers for returned goods and Minute of sale return stated information about Name of customer,
address, products ‘code, name of goods, quantity, amount and reason for return.
The warehouse keeper will check goods condition (date of goods). If the returned goods are accepted,
each branch prepares “Bảng trình đề nghị trả hàng” and send to sale department and GD for approval.
Returned goods are placed back in the proper location in the warehouse and the inventory records are
updated to reflect the increase in inventory.

WCGW: Unauthorized sale return is recorded

Control 11: Sale return is approved by Head of Sale Department and General director.

AR reconciliation:

XYZ Co. reconciles AR balance with customer every month via phone and prepares Debt reconciliation
minutes (Biên bản đối chiếu công nợ) quarterly, which is signed by CA and Director of branch and
customer. Each Branch is responsible for its customer.

WCGW: Fictitious/duplicate sales are recorded

Control 12: Quarterly, Debt reconciliation minutes is prepared and send to customer for
confirmation.

WCGW: C – Revenue was recognized in wrong period

Control 9: Monthly, Branch, Production department and Head office accountant perform three-
way matching between sale report, internal invoice of head office and invoice request from
Branch.
Control 12: Quarterly, Debt reconciliation minutes is prepared and send to customer for
confirmation.

Reporting
When issued invoice, system automatically recognized sales as follow:

Dr 131
Cr 511
Cr 333

Dr 632
Cr 152/155

If customer do not payment when due date, system automatically update the credit limit in master file.

Summary of WCGW

No WCGW Controls Frequenc

Control Type
y
1 R&O-Sale to Control 1: Credit limit for each Manual prevent Other
unauthorized customer, customer is reviewed and
unrecoverable approved by General Director.
receivables. Control 2: Sale contract was Manual prevent Other
reviewed and signed off by
 Branch’s Director for OTC
channel and ETC channel or
General director for Export.

2 E&O - Control 3: System prevents the Application - Daily

Fictitious/duplicate duplicate customer’s code. prevent
sales are recorded Control 4: Only IT have Manual prevent Other
authorized to update or modify
master data related to price,
customer
Control 6: Credit limit of each Manual prevent Daily
customer is reviewed by admin
staff before process sale order
Control 9: Monthly, Branch, Manual prevent Monthly
Production department and
Head office accountant perform
three-way matching between
sale report, internal invoice of
head office and invoice request
from Branch
Control 12: Quarterly, Debt Manual prevent Quarterly
reconciliation minutes is
prepared and send to customer
for confirmation.
3 M - Sales are made Control 5: Selling price will be Manual prevent Other
with unapproved selling approved by CA and GD before
price updating to the system
Control 9: Monthly, Branch, Manual prevent Monthly
Production department and
Head office accountant perform
three-way matching between
sale report, internal invoice of
head office and invoice request
from Branch
4 C&M-Invoice misstates Control 7: Invoice was interfaced Application - Daily
the quantity of goods directly to HO when admin staff prevent
shipped. press "Process SO". Item on
Invoice, (Billing field in ERP)
such as price, amount… can't be
modified after invoice was signed
by authorized person.
Control 8: Delivery tracking note Manual prevent Daily
is signed by customer to confirm
the actual goods received.
5 C&M - Sales discounts Control 10: Discount amount Manual prevent Other
are incorrectly must be updated and approved
recorded. by authorised person.
Control 12: Quarterly, Debt Manual prevent Quarterly
reconciliation minutes is
prepared and send to customer
for confirmation.
6 M&C - Unauthorized Control 11: Sale return is Manual prevent Other
sale return is recorded approved by Head of Sale
 Department and General
director.
Control 12: Quarterly, Debt Manual prevent Quarterly
reconciliation minutes is
prepared and send to customer
for confirmation.
7 C – Revenue was Control 9: Monthly, Branch, Manual prevent Monthly
recognized in wrong Production department and Head
period office accountant perform three-
way matching between sale
report, internal invoice of head
office and invoice request from
Branch
Control 12: Quarterly, Debt Manual prevent Quarterly
reconciliation minutes is
prepared and send to customer
for confirmation.