8 - Sales Cycle

Question 1

general controls that apply to all cycles?

Answer 1

SCRUMA

Segregation of duties
Custody of assets (physical protect)
Reconciliations (info integrity - VAC)
Unused stationery (source docs)
Mgmt supervision
Authorisations

Question 2

examples in sales cycle?

Answer 2

initiation, execution, recording, accounting, payments

Question 3

risks / negative obj for customer orders?

Answer 3

• orders accepted from non-creditworthy / non-genuine customers due to not following credit policy
• not acted upon timeously due to order forms lost
• details on order form not A+C due to system glitches (capturing errors)

Question 4

controls for customer orders?

Answer 4

• customer credit application form

- internal sales order – only sent to authorized cust

Question 5

risks / negative obj for warehouse/dispatch?

Answer 5

• goods stolen/removed from inv for unauth sale
• deliveries not made timeously
• goods not delivered, wrong goods
• goods damaged in transit

Question 6

controls for warehouse/dispatch?

Answer 6

• CCTV cameras
• mgmt supervision
• picking slips signed by packer and checked by mgmt to prevent incorrect items
• delivery notes signed by cust and deliverer

Question 7

risks / negative obj for invoicing / recording?

Answer 7

• goods not invoiced bc delivery notes are lost
• inaccurate invoices prepared
• invoices created when there’s no order – fraud
• duplicate invoices not removed

Question 8

controls for invoicing / recording?

Answer 8

• take prices from authorized list
• sequence checks for duplicates
• reconciliations
• CCTV cameras

Question 9

controls for price lists?

Answer 9

same as for masterfiles – mgmt must sign when reviewing them etc

Question 10

risks / negative obj for managing debtors?

Answer 10

• debtors won’t pay timeously
• debtors not credit worthy / become not
• FS incorrect (not valid) as we recorded more debts than we expect to receive
• not tracking outstanding debts; don’t know who owes

Question 11

controls for managing debtors?

Answer 11

• age analysis
• debtors statement (shows transaction history)
• incentives (discounts or interest)
• accs receivable listing (how much each debtor owes)

Question 12

risks / negative obj for returns?

Answer 12

• unauthorized, ingenuine returns (used/damaged stock, not our stock, not following policy)
• incorrect capturing of returns (quantity, price)

Question 13

controls for returns?

Answer 13

• GRN (details, linked to sale invoice, shows inspection)
• credit note showing that we owe the customer; signed and checked by fin mgr
• link docs to sales invoice to check if sale was genuine and that it matches GRN

Question 14

what is outsourcing?

Answer 14

a business practice used by companies which involves shifting tasks/operations to an external contracted party for a significant time period

Question 15

two parties in an outsourcing agreement?

Answer 15

• outsourced

- vendor

Question 16

what is the outsourcer?

Answer 16

the client who wants to outsource

Question 17

what is the vendor?

Answer 17

the external provider who provides the service to the company

Question 18

advantages of outsourcing?

Answer 18

• business can concentrate on their core activities
• vendor is a specialist
• cheaper = no capital investment = no human capital costs
• flexibility
• freedom to choose a vendor

Question 19

disadvantages of outsourcing?

Answer 19

• risk that quality of g/s is not good
• late delivery, incomplete performance
• hidden costs, increased costs
• language barriers
• public opinion
• legal issues/data confidentiality
• layoffs

Question 20

controls for outsourcing?

Answer 20

• agreements / contracts
• review
• monitoring
• quality checks