The Revenue Cycle of XYZ Limited. After finishing your Master of Professional Accounting, you started your accounting consultancy in Brisbane, Queensland, Australia. You got a high distinction in...

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The Revenue Cycle of XYZ Limited. After finishing your Master of Professional Accounting, you started your accounting consultancy in Brisbane, Queensland, Australia. You got a high distinction in HI5019 Strategic Information System and preferred to analyse the business processes, risks and internal controls. XYZ is one of your clients, and the CEO of XYZ is delighted with your services.1 The head of the accounting department is concerned about their revenue cycle. Therefore, he has recently contacted you to evaluate their revenue cycle. During the initial meeting, you elaborate him that conceptually, the revenue cycle is a recurring set of business activities and related data processing operations associated with providing goods and services to customers and collecting their cash payments. This definition reveals that the revenue cycle can be categorised into (1) sales order processing procedures (SOPP), and (2) cash receipts procedures (CRP). The SOPP and CRP of XYZ are elaborated below. Therefore, you requested the head of the accounting department to describe the SOPP and the CRP of XYZ Limited separately. This description is given below. SOPP of XYZ Limited The sales department receives the unstandardised sales order since customer orders are mailed, e-mailed or faxed to the sales department. The sales clerk first converts the unstandardised sales order into the standardised sales order. For this purpose, the sales representative requests the missing information, if any. When the order is received, the sales clerk checks the customer’s creditworthiness of the customer from his computer terminal. Three years ago, the sales clerk requested the accounting department to provide him with a list of customers whose account receivables are written off. The sales clerk is still using this information to check the creditworthiness of the customers. The sales clerk is using the same procedure to check the creditworthiness of the new customers. The customer’s order is rejected if the customer’s credit is not verified. The sales order processing is started after the credit verification. In particular, the sales clerk records the approved standardised sales order in the sales order system through his computer terminal. A digital copy of the order is distributed to the warehouse and the shipping department terminals for further processing. The computer system automatically records the sale in the sales journal. The clerk reviews this entry and files the hard copy of the customer order in the sales department. 1 XYZ is a wholesaler of rafting and camping equipment that serves outdoor sports camping retailers throughout the Queensland. HI5019 T3 2020 Assessment 1: Individual Assignment 3 As indicated above, the receipt of the digital sales order prompts on the computer terminal of the warehouse manager. Further, the stock release and the shipping notice are also accessible at the warehouse terminal. For further processing, the warehouse manager prints out the sales order, the stock release, and the shipping notice. Using the stock release copy, a warehouse clerk picks the selected items from the shelves and sends them to the shipping department along with the stock release and the shipping notice. The warehouse manager then updates the inventory subsidiary ledger and the general ledger control account from his computer terminal. The shipping clerk receives the physical stock, the stock release, and the shipping notice from the warehouse manager. The shipping clerk matches them to the corresponding digital sales order displayed on his terminal. If everything matches, he prints out three hard copies of the bill of lading and a packing slip. The shipping clerk sends two copies of the bill of lading and the packing slip, along with the goods, to the carrier. The stock release copy and the shipping notice are sent to the accounts receivable department. The third bill of lading copy is filed in the shipping department. Account receivable clerk receives the stock release and shipping notice from the shipping clerk. Then, the accounts receivable clerk manually creates a hard-copy invoice, which is immediately mailed to the customer. After mailing the invoice, the clerk uses information on the stock release to update the accounts receivable subsidiary ledger and general ledger from his computer terminal. After the records are updated, the clerk files the stock release and shipping notice in the accounts receivable department. Sometimes, the account receivable clerk reconciles the quantities from the sales order and adjusts the account receivables. CRP of XYZ Limited The payments of customers come directly to the general mailroom along with other mail items. The mail clerk performs the following tasks: • Sorts the mail, • Opens the customer payment envelope, • Removes the customer’s check and remittance advice, and • Reconciles the two documents. To control the checks and remittance advices, the clerk manually prepares two hard copies of a remittance list. He sends one copy to the accounts receivable department, along with the corresponding remittance advices. The other copy of the remittance list accompanies the checks to the cash receipts department. Once the checks and remittance list arrive in the cash receipts department, the treasurer performs the following tasks: • Reconciles the documents, • Endorses the checks, • Manually prepares three hard copies of a deposit slip, • Updates the cash receipts journal and the general ledger from his computer terminal, • Sends the checks and two copies of the deposit slip to the bank, and • Files the third copy of the deposit slip and the remittance in the department. HI5019 T3 2020 Assessment 1: Individual Assignment 4 The accounts receivable clerk receives the remittance list and remittance advice from the mailroom and reconciles these two documents. He then updates the accounts receivable subsidiary ledger and the general ledger. Then, account receivable files the two documents in the department. Required Based on the above information, prepare a report for the CEO of XYZ Limited to evaluate their revenue cycle. In your report, you need to include the following items: 1. The CEO asks you to start the report from five general risks involved in the revenue cycle of any business. Further, indicate the physical and IT control against each risk. 2. Describe potential internal control weaknesses in the sales order processing procedures and cash receipts procedures of XYZ Limited. 3. Discuss the potential risks associated with the internal control weaknesses identified in Section (2) above. 4. Based on Section (3) above, what types are frauds are possible. Hint: we have discussed different types of frauds in the interactive tutorial and lectures. Your discussion should be based on these contents.
Answered 3 days AfterJan 11, 2021HI5019

Answer To: The Revenue Cycle of XYZ Limited. After finishing your Master of Professional Accounting, you...

Sanjukta answered on Jan 14 2021
122 Votes
1
Accounting
Executive summary
This report revolves on XYZ Ltd's income period just as XYZ Limited's Sales Order Processing Procedures (SOPP) and Cash Receipts Procedures (CRP), which is a distributer of boating and outdoors hardware providing Queensland-wide open air exercises outdoors retailers
Table of Contents
Executive summary    2
Introduction    4
Question 1    4
Question 2    7
Question 3    8
Question 4    9
Conclusion    10
Refe
rences    11
Introduction
It has been observed that the XYZ is a camping as well as rafting supplies wholesaler supplying the recreational sports camping dealers throughout the entire Queensland. Furthermore, it is evident that the camping and rafting are the activities of the outdoor sports that cross a river or even the other water body using the raft. It is mainly achieved with the different degrees of hard whether or the whitewater. Furthermore, this is also said to be a part of the experience for coping up with the danger as well as the need for the teamwork. This research will be dealing with identifying sales order handling process of the XYZ along with the cash order process. On the other hand, the revenue cycle is one of the best ways for managing and identifying the process for completing accounting process for documenting revenue that is generated from the goods or services of a company, including the recording and monitoring accounting process.
Question 1
There are some of the most common risks that are connected with the revenue cycle of any kind of business. However, the most common risks that is connected with the revenue cycle that consists of accuracy or the authorization of the sales contracts with the clients. A business must make sure that they have quoted the price properly following the sales pricing policy.
Generic execution risk- the revenue cycle execution risks can be highlighted during the delivery of the services and goods along with the services, receiving services and good. The control measures consists of achieving the understanding of the procedure, identifying the risk that is associated with the service/goods provided along with the cash received and also identifying the factors that tend to contribute toward the significant risks (Shim, 2013).
Information system risks- It can be said that this mainly consists of updating and also recording risks. During the procedure of updating and recording information can be recorded incorrectly, that results in the incorrect financial statements and transnational errors. The control approach in the case of the information risk is mainly making sure measures that will be enabling the recording of proper information are put in the right place. If someone manages or owns a business that makes use of the IT, it is vital to identify the risks of the IT systems. Furthermore, it is quite evident that the owners of the business have legal obligations in terms of the electronic transactions, privacy, as well as the training of the employees that influences the strategies of the IT risk management (McDermott, Jones and Stuckey, 2012). IT risks tend to consists of the software and the hardware failure, spam, errors of the human beings, as well as the malicious attacks and the natural disasters that consists of the cyclones, fires, or even the floods. The IT risks can be managed properly simply by completing an assessment of the business risk. Having a continuity plan of the business can help the businesses to recover any kind of incident regarding the IT. On the contrary, IT risk management as argued by some of the scholars can be quite beneficial in the long term if it addresses the expectations of the business.
Accuracy of the sales contracts with the clients- there are some of the sales orders that is accepted without the knowledge of the management that tends to directly violate the regulations and rules of the government. The business needs to review how credit is extended to the consumers who represent unacceptable credit risks to the firm.
Sales to the un-creditworthy consumers- It is needless to say that there is an increased risk in terms of the incurring losses as a result of bad debts taking place on sales to the un-creditworthy consumers as well as a risk of loss as a result of deliveries to the fictitious consumers. The physical control will...
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