Revenue Controls Flashcards
formula = how important the risk is
magnitude x likelihood of a risk materialising
the revenue process : ordering
how the customer orders from a company
the revenue process : dispatch and invoicing
how the customer is asked for payment by a company and gets the goods
the revenue process : recording
did the company record the sale and put it in the right place in their accounts
the revenue process : cash collection
is the company actuallly collecting the cash they are owed
dispatch and invoiving : what we want
make sure all dispatches are recorded , correctly invoiced and invoices relate to the product and credit notes are only given for valid reasons
dispatch and invoicing : risks
- goods may be dispatched but not invoiced for
- they may be dispatch and not recorded
- invoices might be raised in error with customers
- invoives may be wrongly cancelled by credit notes
controls put in place within a business
- authorisation for dispatch
- examination and recording of dispatched goods
- matching records between firm and customer
- prenumbering dispatch records
- condition and recording or returned goods
- signature of dispatch records by customers
- correct preparation of invoices (price lists etc)
- credit notes authorised and numbered
- matching sales invoices to dispatch records
- regularly reveiwing records
what could we test
- verify the details of trade sales or goods dispatch records
- verifying sales against inventory records
- verify non-routine sales against records/approvals
- verify credit notes with supporting evidence
- test numerical sequences of despatch records, invoices and credit notes inquiring into missing numbers
- check that dispatches on special terms were authorised
recording : what we want
- they want to record invoiced sales, credit notes and sales properly.
- potential irrecoverable recievables are identified
- cut off is correctly applied
recording : risks
- invoiced sales may not be correctly recorded
- credit notes not correctly recorded
- debts may be incluuded in recievables that are not collectable
recording : potential controls
Segregation of duties
• Recording of sales invoices sequences and control over spoiltinvoices
• Matching cash receipts with invoices
• Retention of customer remittance advices
• Cut off procedures
• Separate recording of sales returns, price adjustments etc
• Regular preparation of trade receivables statements and regular checking
• Safeguarding of trade receivables statements so they cannotbe changed
• Receive and follow up of overdue accounts
• Authorisation of writing off irrecoverable receivables
• Analytical review of receivables and profit margins
recording : test of controls
Receivables ledger
• Check entries against invoices and credit notes
• Check additions, cross casts and balances carried down
• Note and enquire into contra entries
• Scrutinise accounts to see if credit limits be observed
• Check trade receivables statements are prepared and sent ourregularly
• Check that overdue accounts are followed up
• Check that all irrecoverable receivables written off have been authorised by management
cash collection : what company wants
- all money is recieved, recorded and banked
cash collection : risks
money is being recevied and not recorded or banked
