Revenue System Flashcards
Objective related to ordering, despatch/invoice or recording?
All sales that have been invoiced have been put in the general ledger
Recording
Objective related to ordering, despatch/invoice or recording?
Orders are fulfilled
Ordering
Objective related to ordering, despatch/invoice or recording?
Cut-off is correct
Recording
Objective related to ordering, despatch/invoice or recording?
Goods are only supplied to good credit risks
Ordering
Objective related to ordering, despatch/invoice or recording?
Goods are correctly invoiced
Despatch/invoice
Objective related to ordering, despatch/invoice or recording?
Customers are encouraged to pay promptly
Ordering
MC Plc is a company that has had a number of inquiries from potential new customers in recent months. The sales director is excited at this potential sales growth, but financial controlled is concerned that company could be exposed to risk of increased bad debts.
Which two internal controls will mitigate this risk of bad debts arising from new customers?
A. Obtaining a credit reference for new customers
B. Matching of customer orders with dispatch notes
C. Quoting of correct prices to customers making orders
D. Authorisation of new customers by senior staff member
E. Authorisation for changes in customer data
A, D
Which three of the following controls will helps to mitigate risk of goods being dispatched but not invoiced?
A. Pre-numbering of goods dispatched notes and regular checks on sequence
B. Pre-numbering of invoices and regular checks on sequence
C. Matching of goods dispatched notes with orders and invoices
D. Regular review of dispatch notes not matched with invoices
A, C, D
The auditor at Ice Limited, a wholesale of frozen foods, has discovered that receivables ledger clerk has not matched receipts with invoices when processing receipts onto ledger.
Which two of the following are potential risks arising from this failure?
A. The clerk could be siphoning off individual receipts and defrauding the company
B. Old outstanding invoices could be left unpaid
C. Sales might be recorded in the wrong supplier’s accounts
D. Sales may not be recorded properly in the sales account
A and B
An effective system of internal control requires segregation of basic functions. Which three of the following functions should ideally be segregated?
A. Authorisation of orders
B. Invoicing
C. Reconciliation of receivables ledger with receivables ledger control account
D. Recording cash receipts on receivables ledger
E. Credit control
A, B, and D
Is this process a strength or deficiency in the system?
Written orders are received in the sales office. Orders are processed into the sales system with no further action being taken.
Deficiency
The customer’s credit status is not checked before the order is processed
The order generates a production note which is forwarded to the production department on the basis of which they fulfil the order. Completed goods are dispatched with a delivery note, a copy of which is matched with the production note and sent to the invoicing department.
Strength
The invoices are generated from goods dispatched information
Is this process a strength or deficiency in the system?
Unfulfilled production notes are placed in a pending file which is reviewed weekly and completed as soon as possible
Strength
The production is kept up to date by weekly review of outstanding orders
The directions of Lyton Limited (LL) have just uncovered a fraud being perpetrated by the stores manager. He was in charge of ordering, has raised a number of false orders to non-existent suppliers, raised goods received notes in respect of non-existent deliveries and forwarded an invoice to the accounts department, which was then paid
Which two of the following controls could have prevented this fraud?
A. Approved list of suppliers
B. Check of goods inward by person other than orderer
C. Pre-numbered order forms
D. Blank order forms locked in a safe
A, B
