Revenue and Receipt cycle Flashcards
Risks and internal controls in the cycle.
1.Ordering by customer
New customers who are not creditworthy are accepted and provided with credit (validity) due to the credit policy not being followed/ there being no credit policy
Customer completes a credit application form. The credit controller performs checks on the credit application form to ensure the
client is genuine,
the credit card details and other information provided by the client are valid
and that the client will be able to pay the amounts owed by investigating their credit history and signs as evidence of control activity performed.
New clients are only added to the authorised client list when approved by the credit controller.
Credit limits are set for each client by the credit controller.
1.Ordering by customer
Order is received from customer, but not acted upon (or not acted upon timeously), (operational control), because order forms may get lost.
All client orders and internal sales orders are sequentially numbered and a sequence check of these documents is performed by the sales manager and any discrepancies are followed up on.
1.Ordering by customer
The product prices/ quantities/ descriptions included on order form are not those agreed with customer, because capturing errors are made.
The information on the client order and the internal sales order are compared to each other by both the client and the sales ordering clerk and both sign as evidence of agreement.
2.Warehouse and Dispatch
Valid picking slips may not be acted upon due to employees committing fraud.
Once an item has been selected the employee ticks it off on the picking slip. When all the items listed on the picking slip are selected, the employee signs the picking slip as evidence of the selection performed.
2.Warehouse and Dispatch
Goods may be removed from inventory for unauthorised sales or simply stolen on delivery (theft of inventory) due to employees committing fraud.
The warehouse manager performs a review of the work performed by the warehouse employee to ensure that all the handbags selected by the employee are supported by the picking slip.
2.Warehouse and Dispatch
Incorrect quantities picked and delivered due to warehouse employees counting incorrectly.
The delivery note is agreed to the client order and the picking slip by the warehouse manager and follows up on any discrepancies.
2.Warehouse and Dispatch
Inaccurate or incomplete delivery notes made out due to capturing errors by staff.
The sales ordering clerk regularly follows up on any unfilled orders and follows up on any discrepancies.
All the documents are sequentially numbered and sequence checked by the financial accountant and follows up on any discrepancies.
2.Warehouse and Dispatch
Goods may not be delivered due to stock not being loaded onto trucks/ goods being stolen.
The distribution manager and distribution clerk supervise the packing of the handbags into the vehicle by the delivery staff.
The driver signs the delivery list as acknowledgement of receipt of the handbags.
2.Warehouse and Dispatch
Customers may fraudulently deny having received the goods due to lack of integrity/ wanting to commit fraud/ for personal gain.
On delivery of the handbags to the client, the client signs both the original and copy of the delivery note as acknowledgement of receipt of the handbags.
2.Warehouse and Dispatch
“out of stock” items may not be identified due to inventory records not being updated/ stock stolen.
The accountant ensures that all delivery notes have been accounted for by following up on any delivery notes and other supporting documents that have not been returned timeously.
And performs stock counts.
3.Invoicing
Invoices may be inaccurately prepared (price, quantity and VAT) due to capturing errors/ calculation errors
The accountant then agrees and compares the
details of the internal sales order, the picking slip and the delivery note.
The prices that have been quoted to the client as per the internal sales order are checked against the authorized price list/quotation.
The Accountant then generates a sales invoice and recalculates the prices, casts, discounts, VAT calculations and client information on the
invoice.
3.Invoicing
Goods may not be invoiced due to delivery notes getting lost
All documents are to be sequence checked
by the accountant and missing documents must be followed up on.
4.Recording
Invoices may not be recorded (or fictitious invoices recorded) due to fraud/human error (provide application)
Invoices recorded in duplicate due to fraud/human error (provide application)
Invoices may be recorded in the wrong financial year due to errors in recording sales around year end
Invoices recorded at incorrect amounts due to fraud/human error (provide application)
Invoices classified incorrectly such as to the wrong debtor due to fraud/human error (provide application)
The financial manager reviews the work performed by the accountant
by performing a sequence check of the journal entries and following up on any missing invoices;
checking the client details, quantity and amounts in the sales journal to the invoice and
checking the postings of the sales journal to the general ledger and debtors’ ledger.
A debtors reconciliation of the debtors ledger and debtors control account in the general ledger is conducted by the financial manager and follows up on any discrepancies.
5.Receiving and Recording Payments
Cash may be stolen (misappropriation of cash) due to employees committing fraud
Cash may go missing due to negligence/ not keeping it secure
All cash payments received are banked daily an authorised employee.
The financial manager reconciles the receipts issued to
clients with the bank statement.
5.Receiving and Recording Payments
Receipts not recorded timeously due to employees being inefficient/overworked
Segregation of work, and regularly check up on employees by the financial manager.
