Class_12_Controls_Revenue_Cycle_handouts

Class_12_Controls_Revenue_Cycle_handouts - Internal...

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Unformatted text preview: Internal Controls: Revenue Cycle October 12, 2011 PARTIAL ORGANIZATION CHART FOR UNITS INVOLVED IN REVENUE CYCLE Takes customer orders Authorizes credit for existing customers in good standing Checks inventory availability Sal es Or der Cu stom er Ser vice VP of Ma rket ing Wa reho use Sh ipp ing VP of Ma nuf act uring B illing Dep t. Acc oun ts Rec eivab le Con tro ller Cr ed it Ma nag er Cas h ier Trea sur er CF O CEO CONTROL OBJECTIVES, THREATS, AND PROCEDURES In the revenue cycle (or any cycle), a well-designed AIS should provide adequate controls to ensure that the following objectives are met: All _____________________________. All recorded transactions are ______________. All valid and authorized transactions are __________________. All transactions are ___________________________. Assets are ______________________________________. Business activities are _________________________________. The company is in ________________ with all applicable CONTROL OBJECTIVES, THREATS, AND PROCEDURES In the revenue cycle (or any cycle), a well-designed AIS should provide adequate controls to ensure that the following objectives are met: All transactions are properly authorized. All recorded transactions are valid. All valid and authorized transactions are recorded. All transactions are recorded accurately. Assets are safeguarded from loss or theft. Business activities are performed efficiently and effectively. The company is in compliance with all applicable laws and regulations. A related threat would be that a transaction would go through ____________________________. Such a transaction might result from either a mistake or a fraud. EXAMPLE: An employee might process an unauthorized write-off of his own account, so that he wouldnt have to pay. CONTROL OBJECTIVES, THREATS, AND PROCEDURES In the revenue cycle (or any cycle), a well-designed AIS should provide adequate controls to ensure that the following objectives are met: All transactions are properly authorized All recorded transactions are valid All valid and authorized transactions are recorded All transactions are recorded accurately Assets are safeguarded from loss or theft Business activities are performed efficiently and effectively The company is in compliance with all applicable laws and regulations The related threat is that a transaction ___________________________, i.e., it didnt actually occur. EXAMPLE 1: An employee records a return of merchandise on his own account when the goods were never really returned. EXAMPLE 2: Many financial statement frauds involve companies recording totally fictitious revenues in order to make the companys financial position appear more favorable than it actually is. CONTROL OBJECTIVES, THREATS, AND PROCEDURES In the revenue cycle (or any cycle), a well-designed AIS should provide adequate controls to ensure that the...
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This note was uploaded on 10/20/2011 for the course ACC 321 taught by Professor Dunn during the Summer '11 term at Michigan State University.

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Class_12_Controls_Revenue_Cycle_handouts - Internal...

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