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    Chapter 6

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    huynguyen2905bmt
    This document discusses controls over a company's revenue system. It covers controls related to ordering, despatch and invoicing, recording sales, and cash collection. The key controls include segregation of duties, authorization procedures, pre-numbering and sequencing of documents, reconciliation, and review and follow-up on overdue accounts. The goal is to ensure accurate and complete recording of sales transactions and collection of cash while mitigating risks like fraudulent orders, unrecorded goods or invoices, and misappropriation of cash.

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    © All Rights Reserved
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    Chapter 6

    Uploaded by

    huynguyen2905bmt
    8 views19 pages
    This document discusses controls over a company's revenue system. It covers controls related to ordering, despatch and invoicing, recording sales, and cash collection. The key controls include segregation of duties, authorization procedures, pre-numbering and sequencing of documents, reconciliation, and review and follow-up on overdue accounts. The goal is to ensure accurate and complete recording of sales transactions and collection of cash while mitigating risks like fraudulent orders, unrecorded goods or invoices, and misappropriation of cash.

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    This document discusses controls over a company's revenue system. It covers controls related to ordering, despatch and invoicing, recording sales, and cash collection. The key controls include segregation of duties, authorization procedures, pre-numbering and sequencing of documents, reconciliation, and review and follow-up on overdue accounts. The goal is to ensure accurate and complete recording of sales transactions and collection of cash while mitigating risks like fraudulent orders, unrecorded goods or invoices, and misappropriation of cash.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    8 views19 pages

    Chapter 6

    Uploaded by

    huynguyen2905bmt
    This document discusses controls over a company's revenue system. It covers controls related to ordering, despatch and invoicing, recording sales, and cash collection. The key controls include segregation of duties, authorization procedures, pre-numbering and sequencing of documents, reconciliation, and review and follow-up on overdue accounts. The goal is to ensure accurate and complete recording of sales transactions and collection of cash while mitigating risks like fraudulent orders, unrecorded goods or invoices, and misappropriation of cash.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 19

    Chapter 6: REVENUE SYSTEM

    ACE THE FUTURE BIG4


    ROAD TO BIG4 – ACCA – CFAB/ICAEW
    Topic list

    1. Ordering
    2. Despatch and invoicing
    3. Recording
    4. Cash collection

    ACE THE FUTURE BIG4


    ROAD TO BIG4 – ACCA – CFAB/ICAEW
    1. Ordering

    ACE THE FUTURE BIG4


    ROAD TO BIG4 – ACCA – CFAB/ICAEW
    Risks and control objectives
    • Orders may be taken from customers who are
    not able to pay
    • Orders may be taken from customers who are
    unlikely to pay for a long time
    • Orders may not be recorded properly and
    therefore not fulfilled and customers might be
    lost

    ACE THE FUTURE BIG4


    ROAD TO BIG4 – ACCA – CFAB/ICAEW
    Controls
    • Segregation of duties; credit control, invoicing
    and inventory dispatch
    • Authorization of credit terms to customers
    – References/credit checks obtained
    – Authorization by senior staff
    – Regular review
    • Authorization for changes in other customer data
    – Change of address supported by letterhead
    – Deletion requests supported by evidence of
    balances cleared/customer in liquidation
    ACE THE FUTURE BIG4
    ROAD TO BIG4 – ACCA – CFAB/ICAEW
    Controls
    • Orders only accepted from customers who have
    no credit problems
    • Sequential numbering of blank pre-printed order
    documents and subsequent checking of
    sequence for completeness
    • Correct prices quoted to customers
    • Matching of customer orders with production
    orders and despatch notes and querying of
    orders not matched
    • Dealing with customer queries
    ACE THE FUTURE BIG4
    ROAD TO BIG4 – ACCA – CFAB/ICAEW
    2. Despatch and invoicing

    ACE THE FUTURE BIG4


    ROAD TO BIG4 – ACCA – CFAB/ICAEW
    Risks and control objectives
    • Goods may be despatched but not recorded so
    they are lost to the business
    • Goods may be despatched but not invoiced for
    • Invoices may be raised in error with resulting
    customer dissatisfaction
    • Invoices may be wrongly cancelled by credit
    notes resulting in loss to the business

    ACE THE FUTURE BIG4


    ROAD TO BIG4 – ACCA – CFAB/ICAEW
    Controls
    • Authorisation of despatch of goods
    – Despatch only on sales order
    – Despatch only to authorised customers
    – Special authorisation of despatches of goods
    free of charge or on special terms
    • Examination of goods outwards as to quantity,
    quality and condition
    • Recording of all goods outwards on a despatch
    note

    ACE THE FUTURE BIG4


    ROAD TO BIG4 – ACCA – CFAB/ICAEW
    Controls
    • Agreement of despatch notes to customer
    orders and invoices
    • Pre-numbering of despatch notes and regular
    checks on sequence
    • Condition of returns checked
    • Recording of goods returned on goods returned
    notes
    • Signature of despatch notes by customers

    ACE THE FUTURE BIG4


    ROAD TO BIG4 – ACCA – CFAB/ICAEW
    Controls
    • Signature of despatch notes by customers
    • Preparation of invoices and credit notes
    – Authorisation of selling prices/use of price lists
    – Authorisation of credit notes
    – Checks on prices, quantities, extensions and
    totals on invoices and credit notes
    – Sequential numbering of blank invoices/credit
    notes and regular sequence checks
    • Inventory records updated
    • Matching of sales invoices with despatch notes
    and sales orders
    ACE THE FUTURE BIG4
    ROAD TO BIG4 – ACCA – CFAB/ICAEW
    3. Recording

    ACE THE FUTURE BIG4


    ROAD TO BIG4 – ACCA – CFAB/ICAEW
    Risks and control objectives
    • Invoiced sales might not be properly recorded
    • Credit notes might not be properly recorded
    • Sales might be recorded in the wrong customer
    accounts
    • Debts might be included on the receivables
    ledger that are not collectable

    ACE THE FUTURE BIG4


    ROAD TO BIG4 – ACCA – CFAB/ICAEW
    Controls
    • Segregation of duties: recording sales,
    maintaining customer accounts and preparing
    statements
    • Recording of sales invoices sequence and control
    over spoilt invoices
    • Matching of cash receipts with invoices
    • Retention of customer remittance advices
    • Separate recording of sales returns, price
    adjustments etc

    ACE THE FUTURE BIG4


    ROAD TO BIG4 – ACCA – CFAB/ICAEW
    Controls
    • Cut-off procedures to ensure goods despatched
    and not invoiced (or vice versa) are properly
    dealt with in the correct period
    • Regular preparation of trade receivables
    statements
    • Checking of trade receivables statements
    • Review and follow-up of overdue accounts
    • Authorisation of writing off for bad debts
    • Reconciliation of receivables ledger control
    account
    ACE THE FUTURE BIG4
    ROAD TO BIG4 – ACCA – CFAB/ICAEW
    4. Cash collection

    ACE THE FUTURE BIG4


    ROAD TO BIG4 – ACCA – CFAB/ICAEW
    Risks and control objectives
    • A risk is that cash is misappropriated before
    recording and/or banking.

    ACE THE FUTURE BIG4


    ROAD TO BIG4 – ACCA – CFAB/ICAEW
    Controls: Segregation of duties
    between the various functions
    Functions Controls
    Recording of • Appointment of responsible person to supervise mail
    receipts • Protection of cash and cheques (restrictive crossing)
    received by post
    Recording of • Restrictions on receipt of cash (by cashiers only, or by sales
    cash sales and representatives)
    collections • Agreement of cash collections with till rolls, bankings and cash
    and sales records
    Banking • Daily bankings
    Safeguarding • Restrictions on opening new bank accounts
    of cash and • Limitations on cash floats held
    bank accounts • Restrictions on payments out of cash received
    General controls • Prompt maintenance of records (cash book, ledger accounts)
    over recording • Limitation of duties of receiving cashiers
    • Ensuring that the person who records cash takes holidays

    ACE THE FUTURE BIG4


    ROAD TO BIG4 – ACCA – CFAB/ICAEW
    Discussion question

    What document will be used as a basis for


    recording sales in the accounting book in the
    following cases:
    1 Sales of goods
    2 Rendering of services
    3 Export

    ACE THE FUTURE BIG4


    ROAD TO BIG4 – ACCA – CFAB/ICAEW

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