REVENUE CYCLE
[Sales order entry—Shipping—Billing & A/R—Cash collections]

AIS must provide adequate controls so that the following objects are met:
(1) Transactions are properly authorized.
(2) Recorded transactions are valid.
(3) All valid, authorized transactions are accurately recorded.
(4) Assets are safeguarded from loss or theft.
(5) Business activities are performed efficiently and effectively.

The following help achieve the above: • Simple, easy-to-complete documents with clear instructions. • Appropriate application controls (e.g., validity or field checks). • Signature space for persons responsible for completion and review of documents. • Prenumbering of the documents.

Revenue Cycle—Major threats & control

(1) Sales to customers with poor credit—(uncollectable sales and losses due to bad debts). Prevention—independent credit approval function and good customer accounting.

(2) Shipping errors—wrong quantities, items, or address: mad customers. Prevention—reconcile shipping notices and picking tickets, bar code scanners, data entry controls.

(3) Theft of inventory—loss of assets ----> inaccurate records. Prevention—Secure inventory and document transfers, good accountability for picking and shipping, and frequently reconcile records with physical count.
(4) Failure to bill customers—loss of inventory, and erroneous data about: sales, inventory, and receivables. Prevention—Separate shipping and billing. Prenumber of shipping documents and reconciliation of all sales documents.

(5) Billing errors—pricing mistakes, overbilling for items not shipped or back ordered—loss assets and mad customers. Prevention—reconciliation of picking tickets and bills of lading with sales orders, data entry edit controls, and price lists.

(6) Theft of cash—loss of assets and overstated A/R. Prevention—separation of duties: