12. The Revenue Cycle: Sales to Cash Collections

Question 1

Describe the revenue cycle

Tip: recurring

Answer 1

The revenue cycle is a recurring set of business activities and related information processing operations associated with providing goods and services to customer and collecting cash in payment for those sales.

Question 2

What are the basic revenue cycle activities

Tip: 1) sales order entry, 2) shipping, 3) billing, 4) cash collections

Answer 2

1. sales order entry, from the customer (som på et website).
2. shipping, pick and package the goods and ships it.
3. billing, send the invoice
4. cash collections, process the payment

Question 3

General threats to the revenue cycle

Answer 3

1. Inaccurate or invalid master data
2. Unauthorized disclosure of sensitive information
3. Loss or destruction of data
4. Poor performance

Question 4

Controls to revenue cycle

Answer 4

1. 1 Data processing integrity
2. 2 Restrict acces to master data
3. 3 Review of all changes to master data
4. 1 Access controls
5. 2 Encryption
6. 3 Tokenization of customer personal information
7. 1. Backup and disaster recovery
8. 1. Managerial reports

Question 5

What are the threats and controls for 1. sales order entry, from the customer (som på et website) from the basic revenue cycle activities

Answer 5

Threats: incomplete or inaccurate orders
stockout or excess inventory

Control: data entry edit controls, restrict access to master data to maintain accuracy, and physical inventory counts

Question 6

What are the threats and controls for 2. shipping, pick and package the goods and ships it. From the basic revenue cycle activities

Answer 6

Threats: picking wrong item of quantity to ship, theft or wrong address.

Controls: barcode technology, strict access to inventory and physical counts of items.

Question 7

What are the threats and controls for 3. billing, send the invoice. From the basic revenue cycle activities

Answer 7

Threats: failure to bill customer, billing errors or posting errors in accounts receivables

Controls: separate shipping and billing functions, configure system for automatically enter price data.
Segregation of authorization and recording function for credit memos.

Question 8

What are the threats and controls for 4. cash collections, process the payment. From the basic revenue cycle activities

Answer 8

Threats: theft of cash, cash flow problems

Controls: proper segregation of cash handling and posting to customer accounts.