Audit Report_IrishM PDF

Transaction Cycle: Revenue Receipt Cycle C. Inventory control department  Primary objective: To control transfers of inventory in and out of storage areas, monitor inventory levels, and report slow-moving or damaged items. Activities 1. Reviews approved sales order received from cred...

Transaction Cycle: Revenue Receipt Cycle C. Inventory control department  Primary objective: To control transfers of inventory in and out of storage areas, monitor inventory levels, and report slow-moving or damaged items. Activities 1. Reviews approved sales order received from credit department 2. Monitors the availability of goods ordered 3. Authorizes the issuance of goods to the shipping department 4. Forwards the approved sales order to shipping department Possible controls Common controls adopted by different entities in this department include:  Inventory control that provides access to sales department to inventory levels  Different inventory management concepts which are applied to provide reasonable assurance the availability of goods when needed D. Shipping department  Primary objective: To provide reasonable assurance that all shipments are authorized. Activities 1. Compares sales order from sales department with goods and approved sales order from inventory control 2. Completes shipping documents and prepares goods for shipment 3. Release goods to carrier and obtains receipt 4. Notifies sales department that goods have been shipped 5. Forwards the shipping documents and approved sales order to billing department Possible controls Common controls adopted by different entities in this department include:  Shipping documents that are pre-numbered and accounted for  Ensure related billings are made on a periodic basis E. Billing department  Primary objective: To provide reasonable assurance that all shipments are billed. Activities 1. Compares the following documents: a) sales order from sales department b) approved sales order and shipping document from shipping department 2. Prepares sales invoice and send copies to customer (thru the carrier) and to inventory accounting Possible controls Common controls adopted by different entities in this department include:  Pre-numbered sales invoice  Shipping document must be present before preparation of sales invoice. F. Accounting department  Inventory: Provides cost information on the goods sold to be forwarded to general accounting and records transaction related to the cost of goods sold.  General: Records the sale and forward sales invoice and related documents to accounts receivable.  Accounts Receivable: Updates subsidiary ledger related to customer's account. Summary of Functions of Departments in the Receipt Cycle Collections A. Mail room or Receptionist  Receives remittance advices and customer checks from customers  Prepares list of receipts  Endorses checks and list of receipts to the treasury department  Endorses remittance advices and list of receipts to the accounts receivable department B. Treasury department  Updates cash records  Prepares deposit slips  Prepares collection summaries, sends copy to accounts receivable and general accounting and retains a copy  Deposits collection to the bank C. Accounting department  Accounts receivable: compares remittance advice from mail room and cash summaries from treasury, updates subsidiary ledgers, and prepares daily summaries to be forwarded to general accounting.  General: compares daily summaries from treasury and accounts receivable, then updates general ledgers. Other activities in the revenue and receipt cycle Uncollected accounts 1. Accounts receivable  Review individual customer accounts periodically and compare against credit limits  Prepare monthly accounts receivable trial balances for reconciliation with the general ledgers (i.e., SL-GL reconciliation) 2. Authorized personnel independent of credit department  Review and age accounts receivable balances periodically 3. Authorized personnel who reports to the treasurer and independent of recording functions or Treasurer to authorize the write-off  In case of delinquent account, such account should be reviewed  If judged to be uncollectible, written authorization to write-off should be sent to accounts receivable and general accounting Sales returns and allowances 1. Sales department  Reviews customer's request for returns and allowances  Grants sales returns and allowances and prepares credit memo which is forwarded to customer, accounts receivable (for recording), and inventory control (for returns) 2. Receiving department  Receives returned goods  Prepare receiving report 3. Inventory control  Compares goods received through the receiving department and credit memo 4. Accounting  Inventory: updates inventory records based on receiving report and prepare daily summaries to be forwarded to general accounting.  Accounts receivable: update records based on the credit memo received and prepares daily summaries to be forwarded to general accounting.  General: compares daily summaries from inventory and accounts receivable, then, updates general ledgers.