05 -- Internal Control—Sales -Receivables-Cash Receipts Cycle

05 -- Internal Control—Sales -Receivables-Cash Receipts Cycle

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CPA AUDITING - STUDY UNIT 5 Internal Control – Sales-Receivables-Cash Receipts Cycle: Core Concepts The cycle approach to the audit divides the auditee’s transactions, balances, and related control activities into groupings of related items. Flowcharting is useful for understanding how these functions are performed, including the flow of documents and information and the implementation of control activities. A. Sales-Receivables-Cash Receipts Cycle. Management is responsible for the establishment of controls to ensure proper acceptance of the customer order; granting of credit approval in accordance with credit limits; safeguarding of assets associated with the sale; timely shipment of goods to customers; billing for shipments at authorized prices; accounting for and collection of receivables; and the recording, safeguarding, and intact depositing of cash (checks) received. 1. Relevant functions in this cycle include sales, credit management, inventory control, warehousing, shipping, billing, receiving, the mail room, cash receipts, accounts receivable, and the general ledger. The organizational structure should separate duties and responsibilities so that an individual is not in the position both to perpetrate and conceal
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05 -- Internal Control—Sales -Receivables-Cash Receipts Cycle

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