Week 9 Cloud 9 Suggested Solutions.pdf - CHAPTER 8 Case...

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Page 1of 9CHAPTER 8 Case study Cloud 9
Page 2of 9(a)Controls: The first two columns below are taken from the solution to the Cloud 9 Assignment in chapter 6. The last column ‘Control’ is the solution to this exercise.Significant Process Potential Misstatements Control Sales/Accounts Receivable Process Credit memos are not issued or recorded for returns on a timely basis or at all. Credit memos > $10,000 are approved by receiving manager and finance director. All others are approved by receiving manager. Bar code scanners used to automatically record sales and returns. Duplicate/false sales transactions are recorded. Sales order automatically matched to dispatch note in Swift prior to shipment. Shipping supervisor enters passcode in Swift authorising each shipment. System generates draft invoice when dispatch note authorised by shipping supervisor. System automatically posts invoice to sales and AR sub-ledgers.
Page 3of 9Significant ProcessPotential MisstatementsControlSales/Accounts Receivable Process Invoice misstates the quantity of goods shipped or incorrect pricing. Draft sales invoices are agreed to dispatch notes signed by customers. Sale price taken from master price file. Sales order automatically matched to dispatch note in Swift prior to shipment. System generates draft invoice when dispatch note authorised by shipping supervisor. System automatically posts invoice to sales and AR sub-ledgers. Proper credit authorisation is not obtained for wholesaler transactions Credit limit check is automatically performed by system against customer master file Sales journal/sub-ledger is incorrectly posted or does not reconcile.

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