Table suggests that restricting physical access to inventory is one way to reduce the threat of theft. How can information technology help accomplish that objective?
TABLE Threats and Controls in the Revenue Cycle
ACTIVITY | THREAT | CONTROLS (FIRST NUMBER REFERS TO THE CORRESPONDING THREAT) |
General issues throughout entire revenue cycle | 1. Inaccurate or invalid master data | 1.1 Data processing integrity controls 1.2 Restriction of access to master data 1.3 Review of all changes to master data |
2. Unauthorized disclosure of sensitive information | 2.1 Access controls 2.2 Encryption | |
3. Loss or destruction of data | 3.1 Backup and disaster recovery procedures | |
4. Poor performance | 4.1 Managerial reports | |
Sales order entry | 5. Incomplete/inaccurate orders | 5.1 Data entry edit controls (see Chapter 10) 5.2 Restriction of access to master data |
6. Invalid orders | 6.1 Digital signatures or written signatures | |
7. Uncollectible accounts | 7.1 Credit limits 7.2 Specific authorization to approve sales to new customers or sales that exceed a customer’s credit limit 7.3 Aging of accounts receivable | |
8. Stockouts or excess inventory | 8.1 Perpetual inventory control system 8.2 Use of bar codes or RFID 8.3 Training 8.4 Periodic physical counts of inventory 8.5 Sales forecasts and activity reports | |
9. Loss of customers | 9.1 CRM systems, self-help Web sites, and proper evaluation of customer service ratings | |
Shipping | 10. Picking the wrong items or the wrong quantity | 10.1 Bar-code and RFID technology 10.2 Reconciliation of picking lists to sales order details |
11. Theft of inventory | 11.1 Restriction of physical access to inventory 11.2 Documentation of all inventory transfers 11.3 RFID and bar-code technology 11.4 Periodic physical counts of inventory and reconciliation to recorded quantities | |
12. Shipping errors (delay or failure to ship, wrong quantities, wrong items, wrong addresses, duplication) | 12.1 Reconciliation of shipping documents with sales orders, picking lists, and packing slips 12.2 Use RFID systems to identify delays 12.3 Data entry via bar-code scanners and RFID 12.4 Data entry edit controls (if shipping data entered on terminals) 12.5 Configuration of ERP system to prevent duplicate shipments | |
Billing | 13. Failure to bill | 13.1 Separation of billing and shipping functions 13.2 Periodic reconciliation of invoices with sales orders, picking tickets, and shipping documents |
14. Billing errors | 14.1 Configuration of system to automatically enter pricing data 14.2 Restriction of access to pricing master data 14.3 Data entry edit controls 14.4 Reconciliation of shipping documents (picking tickets, bills of lading, and packing list) to sales orders | |
15. Posting errors in accounts receivable | 15.1 Data entry controls 15.2 Reconciliation of batch totals 15.3 Mailing of monthly statements to customers 15.4 Reconciliation of subsidiary accounts to general ledger | |
16. Inaccurate or invalid credit memos | 16.1 Segregation of duties of credit memo authorization from both sales order entry and customer account maintenance 16.2 Configuration of system to block credit memos unless there is either corresponding documentation of return of damaged goods or specific authorization by management | |
Cash collections | 17. Theft of cash | 17.1 Segregation duties—the person who handles (deposits) payments from customers should not also
17.2 Use of EFT, FEDI, and lockboxes to minimize handling of customer payments by employees 17.3 Obtain and use a UPIC to receive EFT and FEDI payments from customers. 17.4 Immediately upon opening mail, create list of all customer payments received. 17.5 Prompt, restrictive endorsement of all customer checks 17.6 Having two people open all mail likely to contain customer payments 17.7 Use of cash registers 17.8 Daily deposit of all cash receipts |
18. Cash flow problems | 18.1 Lockbox arrangements, EFT, or credit cards 18.2 Discounts for prompt payment by customers 18.3 Cash flow budgets |
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