AUD-Lesson 3_Revenue Cycle_Audio: Internal Control Continued

Question 1

What are the segregation of duties?

Answer 1

ARCC

Authorization of transactions

Recording (posting) of transactions

Custody of assets

Comparisons (Compare what got recorded actually got deposited)

Question 2

How do you test controls (Tests of ARCC)

Answer 2

RIO

Reperformance

Inspection

Inquiry

Observation

Question 3

What is the function of internal controls?

Answer 3

To prevent misstatements before they occur (most effective), or to detect and correct misstatements (least effective)

Question 4

What kind of risk does cash have?

Answer 4

Cash has increased inherit risk and needs a lot of key controls

Question 5

What is the PPN Accronym for documentation controls?

Answer 5

Preprinted, Prenumbered, Numerically Controlled

Question 6

Which departments get a copy of the Sales Order?

Answer 6

Originator
Credit Department
Billing
Warehouse
Shipping

Question 7

What are the steps followed once payment is received?

Answer 7

The receptionist opens the mail, and stamps the CHECK for Deposit Only (restrictly endorsing) and does nothing else in ARCCS.
-The remittance advice is then sent to Accounting so that the payment can be recorded

A REMITTANCE LISTING is prepared (A listing of all of the checks received)

DEPOSIT SLIP is prepared, and the checks are sent to the bank
-The Deposit Package to The Bank includes the checks, and Remitance Listing

BANK RECONCILIATION
-What deposited actually got recorded

Question 8

What is tracing?

Answer 8

Traces from the source, into the books are records

It tests the completion assertions

Question 9

What is vouching?

Answer 9

Goes from the Book back to the source

This tests the existence or occurence assertion

Question 10

What are the documents in the Revenue Cycle?

Answer 10

The customer purchase order
The Sales Order 
The Bill of Lading.
The Sales invoice
Payment. (Check and Remittance Advice)