ase 4 – Exercise 1a Lakeside Company Revenue and Cash Receipts – Distributorship Revenue Recognition
Individual Assignment 4 template
Case 4 – Exercise 1a
Lakeside Company
Revenue and Cash Receipts – Distributorship Revenue Recognition
Prepared by:
Reviewed by:
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Notes |
Sales Division |
Inventory Department |
Assistant to President |
Controller’s Office |
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A: Record telephone order on pre-numbered sales invoices.
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Case 4 – Exercise 1b
The Lakeside Company
Internal Control Narrative – Cash Receipts
December 31, 2012
Prepared by:
Date:
Analyze the flowchart representation of the Cash Receipts procedures, and prepare a written memorandum to accompany and explain this particular system.
Treasurer’s Office:
Assistant to the President:
Sales Division:
Controller’s Office:
Case 4 – Exercise 4-2 (a)
INTERNAL CONTROL – PRELIMINARY ANALYSIS
CLIENT:
SYSTEM:
DATE:
PREPARED BY:
List each document found in this system, the number of copies, and whether it is prepared internally or externally.
Answer each of the following questions. For each “No” answer, comment on whether an internal control weakness is indicated.
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QUESTION |
YES |
NO |
COMMENT |
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(1) Is each document within this system pre-numbered? |
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(2) Is the authority for completing each document clearly delineated? |
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(3) Are all documents subsequently reviewed by an independent party within the company? |
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(5) Is the record-keeping function independent of the custody function at all points throughout the system? |
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(6) Are all mathematical computations independently verified? |
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(7) Does record-keeping begin at the origin of the transaction? |
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(8) Are all transactions authorized? |
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(9) Indicate any other specific internal control features that have been built into this system.
(10) Indicate any other specific internal control weaknesses that appear to be present in this system.
Exercise 4-2 (b)
Abernethy and Chapman
INTERNAL CONTROL – Control Risk Matrix – Revenue Cycle
Client: Lakeside
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Internal Control |
Revenue Transaction-Related Audit Objectives |
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Occurrence: |
Completeness: |
Accuracy: |
Posting and Summarization: |
Classification: |
Timing: |
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Deficiencies Controls |
Sales orders recorded on pre-numbered forms. L |
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L |
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Assessed Control Risk |
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H – high risk, M- moderate risk, L- low risk
Note: Each deficiency needs to be evaluated by identifying compensating controls, potential misstatements, materiality and the effect on audit evidence.
Case 4 – Exercise 3
The Lakeside Company
Internal Control Weaknesses – Revenue Recognition Procedures
December 31, 2012
Improvements that could be made in the revenue recognition system for the distributorship sales division are listed below.
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