Question

Identify major threats in the revenue cycle, and evaluate the adequacy of various control procedures for dealing with those threats.

Answer 1

Major threats to revenue cycle is:-

1. Sale to customers with poor credit

2. Theft of inventory

3.Theft of cash

4. Incorrect posting of accounts receivables

5.Failure to bill customers

6. Loss of data having details of each transactions

Control procedures to deal with the above threats:-

1.Customers should be evaluated with respect to their credit ratings etc especially when order is big.

2. Inventory should be kept secured and to be released only against proper invoice bill and document authorising the release.

3. Cash should be stored safely and person in control of cash should be spearate from person in charge with accounting. Also, incentives can be given to customer's who give payment online.

4.Account receviables should recorded properly and audit should be done regularly so that any gaps in process should be controlled effectively.

5. Against any release of goods from warehouse, document containing customer details should be checked and cross verified periodically with accounting team, so that any errors in account balances of customers can be checked.

6.Backup of data should be taken on regular intervals so that in case any corruption of data can be reinstated.

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