Participant Material 8.2.4.

1A: Cash Receipts SCOTs form

1. Obtain an understanding of the SCOT

1.1 Automated techniques
Use of automated techniques:
•To obtain an understanding of the SCOT, we start with using automated techniques to obtain information about how
transactions are recorded, processed and reported. We supplement this understanding by performing inquiries, observation and
inspection procedures, as appropriate (refer to sections 1.5a-1.5d).

•To confirm our understanding, we perform walkthrough procedures (refer to part 2.), supplemented by using automated
techniques to follow the entity's data through the critical path.

•As we confirm our understanding of the SCOT, we tag journal entries that may indicate a risk of management override of
controls or the existence of significant unusual transactions. We document our testing of these journal entries in the Execute
tests of journal entries task in EY Canvas.

Suggested reports to use and documentation: The Risk assessment using automated techniques enabler provides guidance on
the suggested reports to use. Consider using the standard workpaper templates to document our procedures. Alternatively, we
prepare a workpaper documenting our analyses or include screenshots and documentation in the text response below.

Guidance
SCOTS 1.2 | SCOTS 4 | Risk assessment using automated techniques enabler | Standard workpaper templates
Not provided for training purposes.
1.2 General questions
We intend to use the simplified version of the SCOT form (formerly forms 750US - 761US) applicable for US private company
audits that do not use the NCE Audit Approach (US Private Client Services (PCS)).
No
Is there a significant risk related to this SCOT?
No
The type of SCOT is: (Routine/Non-routine/Estimation)
Routine
Our preliminary audit strategy for the SCOT as documented in the EY Canvas SCOTs summary screen is: (Controls/Substantive)
Controls
We reviewed the SCOTs summary screen in EY Canvas and:
Confirmed all IT applications used in the SCOT have been identified and added to EY Canvas.
1.3 Related party relationships or transactions
Does the SCOT include related party relationships or transactions?
No.
1.4 Use of service organizations
Does the entity use a service organization within this SCOT?
No
1.5 Critical path of the SCOT
We described the phases of the SCOT including all relevant WCGWs and controls identified, based on the results of our specific
inquiries of the process owner(s) below.
We consider using a flowchart or equivalent documentation to document our understanding of the SCOT. When we use a
flowchart, we relate it using the paperclip icon to each of the text boxes in Sections 1.5a-1.5d below. We also relate the evidence
obtained from the entity that supports our procedures to obtain our understanding of the SCOT to this form.

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Guidance
Flowchart template
1.5a Initiation phase
We described the initiation phase of the SCOT below.
We identified WCGWs and relevant controls (if applicable), created them in EY Canvas and related them below.
We document our procedures to confirm our understanding of the relevant controls in the Canvas Controls form.
Guidance: Initiation is the point where the transaction first enters the entity's SCOT and is prepared and submitted for recording.
When we use automated techniques, we may be able to identify points of initiation; however, we will not always be able to
determine how the initiation occurred. We therefore supplement our understanding obtained from the automated techniques with
inquiries, inspection and observation, as appropriate.

Guidance
SCOTS 2.1 | SCOTS 4 | SCOTS 5
Summit Equipment holds several Swiss Franc based accounts at the Hilltop Bank and Capstone Bank. There are also several petty
cash accounts.

Greater than 80% of the cash receipts are wire transfers and less than 20% are checks.

Online Bank Account Access

Access to the online banking system is restricted to authorized individuals.

Users wanting access to online banking systems need to request approval from the Treasury Department. Access requests (Access
Request Forms) are first reviewed and approved by the relevant Business Unit Financial Controller to ensure the user has a
business need for requesting access.

<SE CR Control 1: Access to online banking systems are limited to authorized personnel based on the approved
authorization listing>.

All checks are received by the Treasury Department. When checks are received, a copy of the check is made by the receptionist.

The Intermediate Accountant will check the online banking systems daily and will identify whether any cash receipts have been
received.

Related objects
WCGWs and related controls
Type:
Design Effectiveness:
Related Canvas Form:
<A detailed assessment of the design effectiveness of SE CR Control 1 has been excluded for learning purposes.>

1.5b Recording phase

We described the recording phase of the SCOT below.
We identified WCGWs and relevant controls (if applicable), created them in EY Canvas and related them below.
We document our procedures to confirm our understanding of the relevant controls in the Canvas Controls form.

Guidance: Recording of the transaction to an IT application is when the transaction is first recorded in the entity's books and
records.

Guidance
SCOTS 2.1 | SCOTS 4 | SCOTS 5

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The receptionist records received checks in the deposit book and the Treasury Analyst deposits the checks in the relevant company
account.

The photocopy of the check is forwarded by the receptionist to the Intermediate Accountant along with any additional supporting
information that may have been received. The deposit receipt is filed in the deposit book by the Treasury Analyst.

Related objects
WCGWs and related controls: N/A
Type: N/A
Design Effectiveness: N/A
Related Canvas Form: N/A
1.5c Processing phase
We described the processing phase of the SCOT below.
We identified WCGWs and relevant controls (if applicable), created them in EY Canvas and related them below.
We document our procedures to confirm our understanding of the relevant controls in the Canvas Controls form.

Guidance: Processing includes any changes, manipulation or transfers of the data in the books and records, including correcting
the transaction, as necessary.

Guidance
SCOTS 2.1 | SCOTS 4 | SCOTS 5
The Intermediate Accountant will check the online banking systems daily. If there is any doubt about what is being received, the
Intermediate Accountant will follow up directly with the Operations Manager.

When the Intermediate Accountant identifies the receipt of a deposited check, they will ensure that the amount matches the amount
recorded in the deposit book and deposit receipt from the bank. The Intermediate Accountant will follow up with the receptionist
(via email) if there is any discrepancy. <SE CR Control 2: The Intermediate Accountant will perform a three-way match for
all check receipts with the amount recorded in the deposit book and deposit receipt from the bank>.

For both wire transfers and check receipts, the Intermediate Accountant will draft the journal to record the cash receipt to the
appropriate cash and AR account as follows in SAP:

DR – Cash
CR – AR Trade Receivables

The journal entry is reviewed and authorized by the Finance Manager in accordance with the entity’s Managing Journal Entries
Policy (SE-004) <SE CR Control 3: Journal entries for cash receipts are prepared and recorded in the GL by the
Intermediate Accountant and are reviewed and approved by the Finance Manager in accordance with the JE Policy (SE-
003 Managing Journal Entries)>.

Once approved in SAP, the journal entry is automatically posted by SAP.

Related objects
WCGWs and related controls
Type:
Design Effectiveness:
Related Canvas Form:
<A detailed assessment of the design effectiveness of SE CR Control 2 and SE CR Control 3 have been excluded for
learning purposes.>

1.5d Reporting phase

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We described the reporting phase of the SCOT below.

We identified WCGWs and relevant controls (if applicable), created them in EY Canvas and related them below.
We document our procedures to confirm our understanding of the relevant controls in the Canvas Controls form.

Guidance: Reporting to the general ledger is when the transaction is transferred to and reported (i.e., posted) in the general
ledger. We obtain an understanding of how transactions are posted to the general ledger and whether these are automated or
manually performed.

Guidance
SCOTS 2.1 | SCOTS 4 | SCOTS 5
Every month, a reconciliation is prepared by the Senior Accountant for each cash account. The Senior Accountant will perform the
reconciliation in a template in Microsoft Excel. The template includes information such as GL account number, preparer details,
GL Amount, bank statement amount, reconciling items and review and approval details.

As part of this process, the Senior Accountant will:

1. Access the relevant online banking system and input the closing balance for the month into the template.
2. Logon to SAP and input the closing GL balance for the month into the template.

If at this stage, there are no reconciling items, the Senior Accountant will physically sign off the reconciliation as prepared and
submit it for review and approval.

If there are reconciling items, the Senior Accountant is required to investigate and resolve these until the difference is less than
CHF 100. To do so, the Senior Accountant will identify the variances by:

1. Downloading a report from SAP containing the transactions for the month including a listing of uncleared checks and
deposits.
2. Reviewing the deposit book for checks that were deposited on or near the month end date that were not receipted in SAP.
3. Reviewing the subsequent month’s bank statement for checks that had been receipted in SAP but cleared subsequent to
the month end date.
4. Looking for the following items:
- Checks/Deposits recorded in the bank records at a different amount from what was recorded by the
company.
- Checks/Deposits recorded in the bank records that were not recorded by the company.

All reconciling items are included in a sub section in the template.

Each reconciliation is reviewed by the Finance Manager. As part of the review, the Finance Manager will check that the parameters
of the reconciliation are correct by checking the opening and closing month-end dates used, and performing a spot check between
the closing balance in the bank reconciliation and SAP.

Any unreconciled differences greater than CHF 10,000 are investigated and resolved before the end of the following month.

If there are unreconciled items or items requiring further investigation, the Finance Manager will return the reconciliation to the
Senior Accountant to address. Types of questions include the source of a reconciling item, business nature of the reconciling item
or confirmation that the reconciling item will clear within the next 30 days. Once resolved it will be resubmitted to the Finance
Manager to recommence their review.

Upon completion of their review, the Finance Manager physically signs off on the reconciliation to indicate their approval of the
reconciliation <SE CR Control 4: Monthly bank reconciliations are prepared by the Senior Accountant and reviewed by the
Finance Manager to ensure reconciling items over CHF 10,000 are reasonable and are properly investigated, that the
balances agree to the underlying support and the reconciliations are prepared within seven days of month-end>.

Once reconciled and approved, the Senior Accountant will place a copy of the reconciliation in the monthly reconciliation file.

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Based on the information provided from our use of automated techniques, inquiries, observation and inspection we identified the
following types of journal entries exist within the SCOT:

Guidance
SCOTS 2.2
Not provided for training purposes.
Based on the information provided from our use of automated techniques, inquiries, observation and inspection we identified the
following types of journal entries exist within each of the system-generated and manual types:

Guidance
SCOTS 2.2
Not provided for training purposes.
We described any other observations regarding the types of journal entries present in the SCOT below.
Guidance: This understanding helps focus our testing of JEs on those for which controls are often less formal (e.g., for non-
recurring JEs, such as adjustments to accounts affected by non-routine or estimation SCOTs), and where we perceive the risk of
management override is greater.
Not provided for training purposes.
Related objects
WCGWs and related controls
WCGWs:
SE Cash Receipt WCGW 1: Cash receipts are not recorded to the appropriate account when received.
SE Cash Receipt WCGW 2: Cash receipts/transfers are recorded in the wrong period.
SE Cash Receipt WCGW 3: Fictitious/duplicate postings of cash receipts are made to the general ledger.
SE Cash Receipt WCGW 4: Cash receipts recorded in the GL differ from amounts actually received.

SE CR Control 4:
Monthly bank reconciliations are prepared by the Senior Accountant and reviewed by the Finance Manager to ensure reconciling
items over 10,000 are reasonable and are properly investigated, that the balances agree to the underlying support and the
reconciliations are prepared within seven days of month end.

Type: IT Dependent Manual Control

Design Effectiveness: Yes
Related Canvas Form: < Canvas Controls form - SE CR Control 4>
1.6 Wrap up our understanding
As we obtained our understanding of the critical path of the SCOT, we obtained an understanding of the policies and procedures
that management uses to determine that directives are carried out and are applied at various organizational and functional levels,
including:
•Authorization
•Segregation of duties
•Safeguarding of assets
•Monitoring of processes
•Information processing, including an understanding of the automated aspects of the SCOTs, which includes:
◦How information is input into the application
◦Manual aspects that depend upon computer functionality or computer-generated data
◦The processing within the relevant IT applications

Guidance
SCOTS 2.3

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We incorporated our understanding within each of the relevant phases of the SCOT and identified and documented WCGWs,
where appropriate.
2. Confirm our understanding of the SCOT
2.1 Performing probing inquiries
Is this an initial audit?
No
Is this a new SCOT identified in the current period (i.e., a SCOT for which we did not perform walkthrough procedures in the prior
period)?
No
We performed probing inquiries to confirm our understanding of the SCOT and identify any changes since the prior period.
Yes
We inquired of the following individuals to confirm our understanding of the SCOT.
Not included for learning purposes.
We performed the following inquiries regarding the business and operating environment, personnel, steps in the critical path and
information system. We ask follow-up questions to clarify and seek additional details about the initial responses.
No changes identified. The responses to the predefined probing inquiries questions (within Form 280) for this area are not included
for learning purposes.
2.2 Select a transaction to perform walkthrough procedures
We selected the following transaction (or more, if appropriate) to confirm our understanding of the SCOT.
Check Number – 30000479808
We documented our procedures to confirm our understanding of the relevant controls (if applicable) in the Canvas Controls form.
2.3 Confirm our understanding of the SCOT
Who performed the walkthrough?
EY
We performed the following procedures to confirm our understanding of the SCOT (Automated techniques/ Inquiry/ Observation/
Inspection):
Sure, I wilAutomated techniques/ Inquiry/ Observation/ Inspection
We used the following automated techniques and documented our observations below (or cross-referenced to relevant
documentation from the techniques):
Refer to GL Analyzer reports and analytical procedures conducted (not provided for training purposes)
We described the procedures we performed to inquire, observe, and/or inspect evidence of the process owner(s) procedures to
confirm our understanding of the SCOT. We attached relevant documentation to this form to support the procedures performed, as
appropriate. Tips: We do not duplicate documentation of inquiries performed in section 2.1
Cash Receipts
EY obtained and reviewed the cash receipt process narrative for Summit Equipment (refer to Summit Equipment Cash Receipts
Process Narrative (PM8.2.1) attached in Canvas).

EY held inquiries with the appropriate process owners to confirm that our understanding of the process was current and accurate.

EY inquired about the process changes from the prior year and noted that there were none. This is consistent with the results of our
walkthrough procedures documented below.

EY selected the following receipt from the current year to walkthrough the cash receipts process:
Customer Name
Check Date
Check Number
Deposit Receipt Number

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Check Amount

IT Overview
The entity uses SAP as the Group’s IT system, which encompasses the cash module. There is restricted user access to SAP <SE
Control 2: The list of authorized users for SAP is reviewed annually by the CFO to ensure users authorization limits and
access rights are appropriate in accordance with their job responsibilities>.

The system generated reports were supported by effective ITGC’s as tested by EY FAIT and the basis for reliance for electronic
audit evidence is documented in our substantive work papers (refer to FY1X Summit Equipment Information Produced by the
Entity Form per Canvas. Note: not provided for learning purposes).

Initiation
EY inquired of Suzanne Johnson (Receptionist) regarding the initiation process of this check receipt. Consistent with the cash
receipt process narrative (refer to Summit Equipment Cash Receipts Process Narrative-PM8.2.1), the process was initiated when
the check was received in the mail.

EY obtained a copy of the check from ABA Tours (Check #30000479808). (Refer to SR CR 1/ of the cash receipt walkthrough
support)

Recording
Once the check was received, Suzanne Johnson (Receptionist) created a photocopy of the check and recorded the check in the
deposit book. Details recorded include date, check number, currency, amount, and the receiver.

Once completed, Suzanne Johnson (Receptionist) then sent:

1. The original copy of the check to the Treasury Analyst who then deposited the check into the relevant company account,
and
2. The photocopy of the check to the Intermediate Accountant.
EY obtained the June Deposit Book and agreed the date, customer and amount to the check from ABA Tours (Check
#30000479808) noting no discrepancies (refer to SR CR 2/ of the cash receipt walkthrough on hard copy file).

Processing

The Intermediate Accountant will check the online banking systems daily and will identify whether any cash receipts have been
received.

EY obtained the bank statement showing the receipt of the check from ABA Tours (Check #30000479808) (refer to SR CR 6/ of
the cash receipt walkthrough on hard copy file).

Eduardo Elizondo (Intermediate Accountant) showed us an email correspondence from another check transaction where there was
adequate follow up for a reconciling item as part of this process. EY obtained and inspected the email to confirm each of the details
described above (Note: not applicable for learning purposes). The reconciling item was due to human error and the incorrect input
of a check amount in the deposit book by the receptionist, which did not agree to the bank statement or deposit receipt. The error
was identified and communicated by Eduardo Elizondo (Intermediate Accountant) to the receptionist. The error was subsequently
revised in the deposit book with the correct amount received. This follow up evidences the level of precision at which the control
operates, as the reconciling item was for the amount of CHF 100.00 and the total account balance for cash and cash equivalents at
the period end was CHF 64,253,776.

We noted that Eduardo Elizondo (Intermediate Accountant) has been in his current position for ten years and appears to have the
necessary competence and authority to properly execute these tasks.

No reconciling items were noted in the check transaction selected for our walkthrough so Eduardo Elizondo drafted the journal
entry to record the cash receipt received from ABA Tours (Check #30000479808)
EY inspected the journal entry. A summary is as follows:

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JE Document #:
Date:
Preparer:
Reviewer:
Entry:
DR 0001301510 – Cash and Bank
CR 0001000050 – Accounts Receivable

The journal entry was reviewed and authorized by Martin J Hayter (Finance Manager) in accordance with the entity’s Managing
Journal Entries Policy (SE-003) <SE CR Control 3: Journal entries for cash receipts are prepared and recorded in the GL by
the Intermediate Accountant and are reviewed and approved by the Finance Manager in accordance with the JE Policy
(SE-003 Managing Journal Entries)>.

As part of our inquiries with Martin J Hayter (Finance Manager), he confirmed that the following is performed as part of his
review:

a) Reviews the proposed journal entry and ensures that it matches the support without exception. EY re-performed
management's review of the journal entry by matching every line dollar for dollar to supporting evidence. EY also re-
performed management's review by assessing the reasonability of the entry (whether the right amounts were booked to the
appropriate GL accounts).

b) EY notes that Journal Number 3200044362 in the amount of CHF 200,315 matched the support without exception.

c) The Finance manager approved the journal entry by checking its parameters (GL coding, journal entry line items and
agreeing the amounts) and sign off electronically on the journal entry upon completion in SAP.

EY inspected the journal entry voucher and observed that Eduardo Elizondo (Intermediate Accountant) had prepared the
journal entry which was signed off by Martin J Hayter (Finance Manager) to indicate their review. EY concluded from the
date of the sign-off the review was performed in a timely manner (Journal Number 201X-4000-3200044362– CHF
200,315 was approved by Martin on 25 June 20X6) (refer to SR CR 4/ of the cash receipt walkthrough on hard copy file).

Once the journal entry was approved it was automatically posted by SAP.

Reporting

Every month, a reconciliation is prepared by the Senior Accountant for each cash account reconciling cash balances.
EY selected the monthly review Martin performed in FY1X June for GL Account 0001301510 as the sample to walkthrough.

2.4 Required inquires

We inquired of individuals involved in the financial reporting process about inappropriate or unusual activity relating to the
processing of journal entries and other adjustments and documented their responses below.

Tip: Consider presenting your response in a tabular format including names and titles of the persons of whom we made inquiries
and the date of our inquiries.

Guidance
FRAUD-RISK 3.2 | SCOTS 7
Martin J Hayter (Finance Manager)

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When we identify fraud risk factors as a result of our inquiries, we include our observations in the 104-B Fraud considerations
form in EY Canvas to evaluate whether they give rise to a risk of material misstatement due to fraud.
No fraud risk factors identified.
3. Conclude on our understanding of the SCOT
3.1 Authorization procedures and segregation of duties
Did we have any observations that would indicate issues related to procedures for authorization of transactions or segregation of
duties? (Yes/ No)

Guidance
SCOTS 7
No
Related objects
WCGWs and related controls: N/A
Type: N/A
Design Effectiveness: N/A
Related Canvas Form: N/A
3.2 Management override of controls
Did we have any observations that would indicate a higher likelihood of management override of controls or other risks of material
misstatement due to fraud in the SCOT? (Yes/ No)

Guidance: We document anything noted during our procedures that would indicate a higher likelihood of management override of
controls or other risks of material misstatement due to fraud in the SCOT.

Guidance
FRAUD-RISK 3.4.2 | SCOTS Documentation
No
Related objects
WCGWs and related controls: N/A
Type: N/A
Design Effectiveness: N/A
Related Canvas Form: N/A
3.3 Conclusion
We confirmed our understanding of the SCOT (i.e., initiation through reporting), including all points in the process where a
material misstatement could occur, in addition to obtaining and reviewing relevant documentation to support our understanding
and:
Our documentation accurately describes the operation of the SCOT and we have identified appropriate WCGWs and relevant
controls (if applicable).

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