Revenue System Flashcards
What three risks might a company recognise when considering sales orders?
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.
What are four control objectives that might arise from the risks when considering sales orders?
Goods and services are only supplied to customers with good credit ratings.
Customers are encouraged to pay promptly.
Orders are recorded correctly.
Orders are fulfilled.
What are eight controls that might be put in place to mitigate the risks when considering sales orders?
Segregation of duties; credit control, invoicing and inventory despatch
Authorisation of credit terms to customers
Authorisation for changes in other customer data
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 records and querying of orders not matched
Dealing with customer queries
When considering despatch and invoicing, which risks might a company recognise?
- Incorrect goods may be dispatched
- Goods may be dispatched but not recorded resulting in loss to the business
- Customers may dispute whether goods received
What are control objectives relating to despatch and invoicing of goods?
- Orders are despatched promptly and to the correct customer
- All orders are despatched
- All orders are recorded
What is the key risk regarding cash collection?
The key risks are that money might be received at the business premises but not be recorded or banked
What are the two control objectives relating to cash collection?
All monies received are recorded.
All monies received are banked.
What are six controls relating to cash collection?
Segregation of duties
Recording of receipts received by post
Recording of cash sales and collection
General controls over recording
Banking
Safeguarding of cash and bank accounts
what are tests of control?
Tests of control are audit procedures designed to evaluate the operating effectiveness of internal controls in preventing, or detecting and correcting material misstatements in the financial statements. Depending on the results of this test, auditors may choose to rely upon a client’s system of controls as part of their auditing activities.
What are four areas regarding tests of controls of cash collection?
Receipts received by post
Cash sales, branch takings
Collections
Cash receipts and cash book
