Problem

Table suggests that restricting physical access to inventory is one way to reduce the thre...

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

a. Post remittances to customer accounts.

b. Create or authorize credit memos.

c. Reconcile the bank account.

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

Step-by-Step Solution

Request Professional Solution

Request Solution!

We need at least 10 more requests to produce the solution.

0 / 10 have requested this problem solution

The more requests, the faster the answer.

Request! (Login Required)


All students who have requested the solution will be notified once they are available.
Add your Solution
Textbook Solutions and Answers Search
Solutions For Problems in Chapter 12