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CHAPTER 6:
REVENUE SYSTEM
Instructor: Assoc.Prof. Doan Thanh Nga, CPA (Australia)
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CHAPTER 6 LEARNING OBJECTIVES
– Describe the business functions in Revenue system
– Understand risks and control objectives; controls and apply test of
control in each stage:
+ Ordering
+ Despatch and invoicing
+ Recording
+ Cash collection
– Identify the deficiencies of Revenue system.
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BUSINESS FUNCTIONS IN REVENUE SYSTEM
There are 4 main stages in revenue system
1. Ordering
2. Despatch and invoicing
3. Recording
4. Cash collection
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Revenue System
Overview
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1. Ordering
2. Despatch and invoicing
3. Recording
4. Cash collection
REVENUE SYSTEM
Identify Risks
Controls
Tests of Controls
Management
Auditors
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Ordering
– sales orders/
customer orders
Despatch and
invoicing
Goods despatched:
– Goods despatched
records/notes
– Sales invoices
Return of goods:
– Goods returned notes
– Credit notes
Recording
Recording invoices:
– Nominal ledger
accounts
– Receivable ledger
Revenue System – documents
Cash
collection
– Cheque
– Cash book
– Receivable Ledger
– Monthly statement to
the customers
– Bank reconciliation
– Processing
customer orders
– Granting credit
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1. ORDERING
•Key risks include accepting customers who are a poor credit risk and not
fulfilling orders.
•Key controls include authorising credit terms to customers and ensuring
orders are matched with production orders and despatch records.
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1. ORDERING
Tests of controlsControlsRisks
•Confirm that references are being
obtained for all new customers
•Confirm that all new accounts on the
receivables ledger have been authorised
by senior staff
•Authorisation of credit terms
to customers
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