Pets Ltd manufactures and sells a range of products for pet animals. Your firm is Birkbeck LLP which has recently been appointed as the external auditors of Pets Ltd. As the audit manager, you are preparing to carry out the audit of Pets Ltd for the year ended 31 March 2022.

Pets Ltd operates from a Head Office based in Central London, with a factory and warehouse based in East London. 90% of Pets Ltd’s sales are made to a range of small and large retailers across the UK. These sales are made through a network of sales agents engaged by Pets Ltd on a commission payment basis. Pets Ltd is trying to develop its online sales presence which currently constitutes 10% of the company’s sales.

Sales system

The sales persons visit customer sites personally and orders taken are emailed to the sales department at the Head Office where staff completes a two-part pre-printed sequentially numbered sales order form. One copy is sent to the central warehouse and the other copy is sent to the finance department. The sales orders are batched and sent to the warehouse and finance department at the end of each working day. Upon receipt of the batched sales orders, sequentially numbered goods despatch notes are completed and filed at the warehouse, and orders that are available in stock are despatched to their destinations the following morning. In order to speed up the sales process, the sales persons have the discretion to grant sales discounts up to a maximum of ten percent. The sales persons are granted access to the customer master data file to be able to record details of new customers and any discounts granted. A copy of the sales order is used to raise the sales invoice by the finance department. The sales invoices are batched and entered weekly into the sales ledger by the sales ledger clerks. The sales ledger is computerized and at the end of each month, an aged list of balances and customer statements are produced. The sales persons distribute the monthly customer statements when they visit customers’ sites on their rounds.

Required:

i) Define application controls; and

ii) Identify and explain TWO application controls that should be adopted by Pets Ltd to ensure the completeness and accuracy of the input of its online sales segment.