AUDITING NOTES
REVENUE AND RECEIPTS CYCLE
This Cycle specifically focuses on the SELLING of inventory by the business.
- It addresses some of the following important functions:
✓ Receiving orders/ordering department.
✓ Sale Authorisation.
✓ Warehouse.
✓ Dispatching.
✓ Accounting/ Invoicing. [DR: Bank, CR: Receivables]
✓ Credit Management. [DR: BANK]
STAGE 1: RECEIVING ORDER FROM CUSTOMERS.
This stage focus on the receiving of orders from customers, it is a control that ensure that
orders are not fictious and that customers who buy on credit are able to make payments
within the given timeframe. Orders can be received in different way:
- Via Phone call – Control is to Read back the items to the customer as confirmation
- Via Email.
- Via Online (Website)
FACTORS TO CONSIDER WHEN DETERMINING THE EFFECTIVENESS OF THIS
STAGE:
- Must ensure the AVAILABILITY OF INVENTORY. (Trigger Back order)
- Determine the CREDIT WORTHINESS of the customer before authorizing the sale.
(Based on their income and expenses)
- Request the customers full details (e.g. full name, address, account number and
contact details)
- Prepare the ISO – INTERNAL SALE ORDER in 3 Documents which consists of
details of the customer & items ordered.
- Must receive the PICKING SLIP.
- Must receive DELIVERY NOTE.
STAGE 1.5 SALE AUTHORIZATION: Must ensure that the customer does not
exceed the credit limit
• ISO - INTERNAL SALES ORDER IS DISTRIBUTED TO THE FOLLOWING
DEPARTMENTS:
1. Sequentially filled at the ordering department (Receiving order).
2. Warehouse.
3. Accounting.
REVENUE AND RECEIPTS CYCLE
This Cycle specifically focuses on the SELLING of inventory by the business.
- It addresses some of the following important functions:
✓ Receiving orders/ordering department.
✓ Sale Authorisation.
✓ Warehouse.
✓ Dispatching.
✓ Accounting/ Invoicing. [DR: Bank, CR: Receivables]
✓ Credit Management. [DR: BANK]
STAGE 1: RECEIVING ORDER FROM CUSTOMERS.
This stage focus on the receiving of orders from customers, it is a control that ensure that
orders are not fictious and that customers who buy on credit are able to make payments
within the given timeframe. Orders can be received in different way:
- Via Phone call – Control is to Read back the items to the customer as confirmation
- Via Email.
- Via Online (Website)
FACTORS TO CONSIDER WHEN DETERMINING THE EFFECTIVENESS OF THIS
STAGE:
- Must ensure the AVAILABILITY OF INVENTORY. (Trigger Back order)
- Determine the CREDIT WORTHINESS of the customer before authorizing the sale.
(Based on their income and expenses)
- Request the customers full details (e.g. full name, address, account number and
contact details)
- Prepare the ISO – INTERNAL SALE ORDER in 3 Documents which consists of
details of the customer & items ordered.
- Must receive the PICKING SLIP.
- Must receive DELIVERY NOTE.
STAGE 1.5 SALE AUTHORIZATION: Must ensure that the customer does not
exceed the credit limit
• ISO - INTERNAL SALES ORDER IS DISTRIBUTED TO THE FOLLOWING
DEPARTMENTS:
1. Sequentially filled at the ordering department (Receiving order).
2. Warehouse.
3. Accounting.
