DOCUMENTS /

NO ACTIVITIES RECORD SALES CREDIT

1 SALES ORDER PROCEDURES
Customer Order(R) /
i Receive Order Sales order (P)
Sales order (R)
ii Check Credit Sales Order (Ap) /
iii Pick Goods -Stock Release docs or
picking ticket<R>
'-Verified stock release
'-Back order record(P)

iv Ship Goods Packing Slip(R)

Shipping notice(P)
bill of ladding(P)Z
Shipping log

v Bill Customers -Sales order(R)

-Shipping notice(R)
-Stock release(R)
-Invoice(P)

vi Update Inventory -Stock Release(R)

-Journal Voucher(P)

vii Update AR
viii Post to GL

2 SALES RETURN PROCEDURE

i Prepare Return Slip
ii Prepare Credit memo
iii Update sales journal
iv Update inventory
v Update AR
vi Update GL

3 CASH RECEIPTS PROCEDURES

i Open mail & Prepare remitance advice
ii Record and Deposit cheques
iii Update AR
iv Update GL
v Reconcile Cash receipts &Deposits

ISSUES / PROBLEMS
1 Selling to uncreditworthy customers
2 Shipping customers the wrong items or incorrect quantities
3 Inaccurately recording sales and cash receipts transaction in journals and accounts
4 Misappropriation of cash receipts and inventory
5 Unauthorised access to accounting records and confidential reports

PHYSICAL CONTROL ( Involved human)

1 Transaction autnorization
2 Segregation of duties
3 Supervision
4 Accounting Records
5 Access Control
6 Independent Verification

IT CONTROL( GENERAL CONTROL & APPLICATION CONTROLS)

GENERAL CONTROL
1 Control over data center
2 Database
3 Network security
4 Systems development
5 Program maintenance

APPLICATION CONTROLS
1 Input control
- Check digit
-Missing data check
-Numeric alphabetic check
-Limit check
-Range check
-'Reasonableness check
-Validity check

2 Process control
- Batch control
-run-to-run control
-Audit trail controls

3 output control
 Hard Copy
- Output spooling (Hard copy)
-Print Programs (Hard Copy)
-Waste (hard Copy)
-Report distribution (Hard Copy)
- EndUser Control (Hard copy)

Digital Output
1 Due to equipment failure
disruption
destruction
corruption
2 due to subversive acts
interception
corruption
 THE REVENUE CYCLE

DIVISION
INVENTORY
WAREHOUSE, SHIPPING, BILLING CONTROL AR GL

/
/
unts
 INTERNAL
CONTROL
PROCESSES (Physical)

Receive order from customer & - Pre-numbered docs

prepare Sales Order
Credit check - Authorization
Set credit limit
-Receive stock release docs - Authorisation (to release
- Pick goods stock)
-Verify goods with order '-Verification
-If goods insufficient, adjust Verified Stock -inventory control
release -stock count
-Perpare back order record
-adjust stock record

-Reconciliation of stock with stock release, -Independent verification

Packing slip and Shipping notice Shipping log
-Shipping prepare bill of ladding, a contract
between seller and shipping co
-Record shipment in shipping log
-Forward Shipping notice &Stock release to
billing
-Update customer order file

-Reconcile Sales order, Shipping notice & Stock -independent verification

release -Record keeping (Sales
-Prepare invoice Journal)
-Record sales in Sales Journal
-Forward Stock Release to inventory Control
-Forward Sales order to AR

-Updates Inventory subsidiary Ledger -Accounting record

-Total inventory reduction(value) send to GL -Journal Voucher
 INTERNAL CONTROL Basic Technology
(IT)

-Automated credit checking

Advanced Technology
 THE EXPEND

ACTIVITIES
INVENTORY
NO DOCUMENTS PURCHASING CONTROL
1 PURCHASES PURCHASING PROCEDURES

Monitor inventory records

P. REQ(R) /

Prepare Purchase Order PO (P), (PO)Blind

copy(P) /
Receive goods Receiving
Report(P)

Update Inventory records /

Set up accounts Payable

2 VOUCHERS PAYABLE SYSTEM

Vouchers Payable system

-Journal
Post to GL Voucher (R)
-A/C Summary

3 CASH DISBURSEMENT SYSTEM

 AP Packet (PO,
Receiving
Identify liabilities due Report,
Supplier's inv)

Prepare Cash disbursement

Update A/P record

Post to GL

SYSTEMS OBJECTIVE
THE EXPENDITURE CYCLE

DIVISION
CASH
RECEIVING DISBURSE-
DEPT A/P DEPT SHIPPING MENT GL PROCESSES

PR prepared based on
routine ordering info fr
Inventory Sub Ledger &
Vendor File

Prepare PO in multiple
copies
Receiving clerk counts
/ goods
Update inventory
(for std costing), else wait for
supplier invoice

- AP clerk reconcile the PO,

/ Receiving Report and invoice
'- Record in Purchases
Journal
'- Post to Suppliers AC in Sub
Ledger

/ - Approval of Cash
disbursement Voucers and
record it in Voucher register
after matching of docs

- Receive Journal Voucher

from AR dept
-Receive A/C Summary from
/ Inventory Control
-Post data in voucher to
Inventory and AP Control
-Reconciles inventory
summary & AP Control
 -Review open AP file
/ -Send AP packet (PO,
Receiving Report, Supplier's
invoicy) for payment
approval

-Clerk review AP packet for

completeness and accuracy
-Clerk prepare cheque and
record details in cheque
/ register / Cash disbursement
journal
-Cheque copy attach with AP
Packet
- Clerk summarizes
transactions and send
Journal Voucher to GL

/ - Receive AP packet that is

marked paid
-Update AP subsidiary ledger
-File in Closed AP file
 INTERNAL
INTERNAL CONTROL
CONTROL (Physical) (IT)

-Authorisation
-reg vendor file

Prenumbered docs

(PO)Blind copy

inventory
Sub Ledger

AP Packet

- Cash disbursement
voucher
'-Voucher register

Independent Verification-
(Reconciliation)
-Authorisation (may practice
multiple level of
authorization)
- Independent verification
(on AP Packet)
NO ACTIVITIES DOCUMENTS PERSONNEL
1 PROVIDE EMPLOYEE PAY DETAILS
/
Prepare and submit PAF Personnel action forms(P)
Update employee details /

2 PROVIDE TIME RECORD

Captures Working time on each production Job Ticket

Captures Workers working time Time Card

3 UPDATE WIP
Summarize charges Labor distribution summary(P)

4 PREPARE PAYROLL
Prepare payroll register Employee payroll records(P)
Prepare paychecks & send for distribution Paychecks(P)
file time card, PAF, copy of payroll register Payroll register (P)

5 DISTRIBUTE PAYCHECK
Distribute checks

6 PREPARE A/C PAYABLES

AP Clerk check Payroll Register Payroll register (R)
Prepare Cash disbursement voucher Cash disbursement Voucher(P)
Record CDV in Voucher register Voucher Register(P)
Submit CDV and Payroll Register packets to
cash disbursement
Send a copy of Disbursement voucher to GL

7 PREPARE CASH DISBURSEMENT

Prepare check for entire payroll & deposit in
Payroll Imprest Account check (for entire payroll)
Send copy of check &Cash Disbursement
Voucher & payroll Register to AP
Prepare Journal Voucher & send to GL Journal Voucher(P)

8 UPDATE GENERAL LEDGER

 Receive Labour Distribution Summary from
Accounting
Receive Disbursement Voucher from AP
Receive journal Voucher from Cash
Disbursement

RISKS
1 Risk of Inaccurately Recording Transactions
2 Risk of Misappropriate of Cash through Payroll Fraud
3 Risk of Unauthorized Access to Payroll Records and Confidential Employee Data
 DIVISION
COST CASH
PRODUCTIO ACCOUNTIN DISBURSEM
N G PAYROLL A/C PAYABLE ENT GL

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/ /
/ /

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 INTERNAL
INTERNAL CONTROL
PROCESSES CONTROL (Physical) (IT) INTEGRATED

-PAF provide employee

details

-Authorisation of time
card
'-Reconcile Job ticket
and time card

-Verification
-pre-numbered

-
 PRODUCTIO
N
PLANNING
NO ACTIVITIES DOCUMENTS &CONTROL
1 PRODUCTION PLANNING AND CONTROL
- Specify materials and Operations req Production schedule
-Production Scheduling

2 MATERIALS AND OPERATION REQUIREMENTS

BOM
-Analyse inventory and sales forecast, engineering PR
specification and BOM to determine RM to purchase PO (Raw Mat)
3 PRODUCTION SCHEDULING

- Schedule influence by BOM and Route Sheets Work order

Move Tickets
Material Requisition
-Prepare master schedule for each task
-Work Order goes to accountant to set up WIP
4 WORK CENTRES AND STOREKEEPING
-Workers seng MR to storekeeping to obtain RM Material Requisition
-Production begin: RM, Machine &Labor
-Supervisor sign Move Ticket when work complete
-Send a copy of MT to Production, Planning & Control
-Work order closed after the last move tickets
-Move Finished Product and Work Order to Finished
Goods warehouse
-Send a copy of Work Order to Inventory Control to
update Finished Good inventory record.
-Supervisor send employee time card and job ticket to
payroll and cost accounting departments
5 INVENTORY CONTROL
–Provides production planning and control with status
reports on finished goods and raw materials inventory.
–Continual updates of raw materials inventory.
–Records completed production by updating FG
inventory records.
 DOCUMENTS
1
Production schedule
-Formal plan and authorisation to begin production
-specify products, no of batches, timetable for starting
and completionof production
Bill of materials (BOM)
- Specify the types and qty of raw matand sub
assemblies for a single unit
Route sheets
- Specify sequesnce of operation and time allocated to
each task
Work Order
-Production order draws from BOM

Move Ticket
- Records work done in each work centre
-Authorize movement of job from one work center to
another

Materials Requisition
-Authorise storekeeper to release materials to work
centre or individual
- Only std qty is released
- Separate requisition for excess amt
-Material return ticket is to return unuse material to
store
 DIVISION

COST
WORK STOREKEEPI INVENTORY ACCOUNTIN GENERAL
CENTRES NG CONTROL G LEDGER
 INTERNAL INTERNAL
CONTROL CONTROL
PROCESSES (Physical) (IT) INTEGRATED
 DIVISION
PRODUCTIO
N
PLANNING WORK STOREKEEPI INVENTORY
NO ACTIVITIES DOCUMENTS &CONTROL CENTRES NG CONTROL
ON

COST INTERNAL INTERNAL

ACCOUNTIN GENERAL CONTROL CONTROL
G LEDGER PROCESSES (Physical) (IT) INTEGRATED
 DIVISION
NO ACTIVITIES DOCUMENTS TPS GLS
1 JOURNAL VOUCHER Journal Vouchers
- summaries of similarctransactions /

- a single unique transactions /

2 GLS DATABASE consist of
- GL master file
- GL history file
-Journal Voucher file
-Journal Voucher history file
DIVISION INTERNAL
FRS PROCESSES CONTROL (Physical)

- State financial amt and affected ledger Manager must

-For routine transactions, adjusting entries and approve Journal
closing entries Vouchers
INTERNAL CONTROL
(IT) INTEGRATED