3

Click here to load reader

Revenue Cycle Audit Objectives

Embed Size (px)

DESCRIPTION

revenue cycle objectives

Citation preview

Page 1: Revenue Cycle Audit Objectives

REVENUE CYCLES AUDIT OBJECTIVES, CONTROLS, AND TEST OF CONTROLS

INPUT CONTROLS

1. Credit Authorization Procedures- Only customer transactions that meet the organization’s credit standards are valid and should be processed

further. 2. Testing Credit Procedures

- It pertains to the valuation/allocation audit objectives and the accuracy objective3. Data Validation Controls

- Input validation controls are intended to detect transcription errors in transaction data before they are processed. Validation procedures are most effective when they are performed as close to the source of transaction as possible.

a. Missing Data Check – are used to examine the contents of a field for the presence of blank data or spaces (missing product numbers, missing customer accounts numbers, or incomplete mailing address)

b. Numeric-alphabetic data checks – determine whether the correct form of data is in a field. An invoice total should not contain alphabetic data.

c. Limit Check-determine if the value In the fields exceeds an authorized limit. (prices limit or discounts limit)

4. Batch Controls – are used to manage high volumes of transaction data through a system. The following are relevant controls:a. A unique batch numberb. A batch datec. A transaction code (indicating the type of transactions, such as sales order or cash receipt).d. The numbers of records in the batch (record count)e. The total dollar value of a financial field (batch control total)f. The total of a unique nonfinancial field (hash total)

PROCESS CONTROLS

1. File Update Controls – monitoring the batch as it moves from one programmed procedure (run) to another.2. Sequence Check Control

- An out-of-sequence sales order record in a batch may prevent the remaining downstream records from being processed

3. Access Controls - Prevent and detect unauthorized and illegal access to the firm’s assets. Inventories and cash are the physical

assets of the revenue cycle.

OUTPUT CONTROLS

- Designed to ensure that information is not lost, misdirected, or corrupted and that system processes function as intended.

EXPENDITURES CYCLE

PURCHASES AND CASH DISBURSEMENT PROCEDURES

1. The revenue cycle or the conversion cycle initiates the purchase process.2. When inventories are reduced by sales, the system determines if the affected items in the inventory subsidiary file

have fallen to their reorder point.3. Upon receipt of the purchase requisition, the purchasing department prepares a five part purchase order.

(Vendors, accounts payable, receiving, data processing, and the purchasing department’s own file.4. When the goods arrive from vendors, the receiving clerk prepares a receiving report. (purchasing, accounts

payable, and data processing)5. The data processing department runs a batch job that updates the inventory subsidiary file from the receiving

reports and removes the “on order” flag from the inventory record.6. When the accounts payable clerk receives the supplier’s invoice, he or she reconciles it with the supporting

documents that were previously placed in the accounts payable pending file.

Page 2: Revenue Cycle Audit Objectives

ADVANTAGES OF AUTOMATED SYSTEM

1. Improved Inventory Control2. Better Cash Management3. Time lag4. Purchasing Bottleneck5. Reduce Excessive Paper Documents6. Segregation of Duties7. Accounting Records and Access controls