VRS11250 - Point of sale (POS) schemes: Assurance
General
Rounding
Scanning
Product file
Copy
Security
General
During the development of a new (or upgraded) EPOS system capable of handling VAT and its subsequent use for VAT accounting, officers will need assurance on various aspects of the total process. The key areas are likely to be:
- the integrity of the scanning process;
- the price/VAT-rate look-up mechanism;
- how the system copes with specials;
- system security and integrity.
Officers will need to liaise with systems development teams (in conjunction with computer audit officers where appropriate) to establish how such assurance is to be obtained; what audit functions are incorporated for commercial needs; and how these can be used to meet our needs.
Rounding
Retailers who operate an EPOS system and who don’t use a retail scheme must round the VAT on each supply using a method which produces a fair and reasonable result. For further information, see section 12 of V1-24A Trader’s Records.
Scanning
Three scenarios are possible: a product may entirely fail to be scanned, may be scanned partially, or may be scanned fully. In the first two cases, this may be recognised or it may not.
Questions to consider:
Scenario 1: If the item fails to scan altogether:
- and the failure is detected, what procedure is used to deal with it?
- but the failure is not detected, how will takings be reconciled?
Scenario 2: If the scan is only partly successful:
- and the failure is detected, what procedure is used to deal with it?
- but the failure is not detected, will the item be put into a dump code?
Scenario 3: If an item scans successfully:
- but the software is unable to access the look-up tables, what happens?
Are there exception reports/management reports that disclose frequency of scan failure, occurrences of dumping, unsuccessful look-ups?
If the percentage of “dumped” items is material, it is necessary to obtain assurance that these are treated in such a way as to yield a fair result - which is not necessarily the case by applying a straightforward global fraction to the dumped total.
Product file
As with any system that depends on tills in stores nationwide accessing a centrally-maintained product file with VAT rates (or distributed copies of a centrally-maintained file), VAT assurance is crucially dependent on the continued integrity of this product file.
Questions to consider
- Where is the product file maintained, how are prices, liability, etc, set and who is authorised to set and change these?
- How are product file updates communicated to the users?
- What procedures exist for the creation/maintenance/validation of VAT information in the product file(s)?
- Does the product file allocate a VAT indicator to each product, to clusters of similar goods or to a department?
- Is the description field on the product file large enough to allow detailed description of the goods sufficient to conduct valid file interrogations? Is that facility always/normally taken advantage of?
- What audit trail exists for changes to the product file?
Copy
Retailers who make supplies at more than one rate of tax may encounter difficulties with certain transactions, including:
- mixed-rate items (such as hampers, port and stilton, magazines with CDs attached);
- business promotions including multi-saves;
- discounts;
- gift vouchers, etc.
An EPOS system may be able to cope with special transactions such as these (a discount may be allocated to an individual product), but this will not always be so. In such cases, it may not be reasonable to expect the retailer to apply the strictly correct VAT treatment to such particular items. An element of adjustment may still be required within the retail scheme (or normal accounting).
In addition, a retailer who processes all movements of goods, etc through the EPOS system may need to make adjustments for those supplies which must be dealt with outside the retail scheme: for example, supplies to other VAT-registered businesses.
Security
The integrity of the process is potentially jeopardised if all the elements of systems (the transaction information, product file, till software, etc) are not backed-up and downloaded at frequent intervals.
Questions to consider:
- How frequently is the till information downloaded to PCs/intermediate computer systems/central accounting?
- Is a back-up transaction record maintained on the till, and for how long? Some businesses are developing an “electronic journal”, effectively an electronic version of the old till roll: this is likely to be a useful audit tool.
In the event of an interruption to the public electricity supply, does the store have back-up power (i) to maintain emergency functions only and/or (ii) to maintain trading?