AISA BANSAO

IT CNCPS SEC 1

Revenue Cycle - Internal Control Assessment

Hi guys, as announced, we'll be providing activities for you to complete during the
quarantine season. 
For this assignment, you are tasked to perform and identify potential internal controls
and how it can address certain risk/issue.  Be as creative as you can. (e.g. Control - The
AP clerk performs three-way matching (invoice, purchase order, receiving report) prior to
processing payment to vendor. Risk - Unauthorized payment to fictitious
purchase/vendor.)

1. You are investing your money and opening a fast-food Mexican restaurant that
accepts only cash for payments. You plan on periodically issuing coupons through the
mail and in local newspapers. What controls (manual) can you set-up over inventory and
cash? 
- For inventory;
Control - Asset custody should be separate from the task of asset record keeping. Duties
between the person who looks after the inventory and the person who maintains
records of inventory should be separate.
Risk – If these tasks are combined it would lead to fraud and material errors. A person
authorized to do both these tasks could steal or lose inventory and adjust the inventory
records to conceal the event.
- For cash;
Control – Similarly, asset custody should be separate from the task of asset record
keeping. The cash receipts department takes custody of the cash asset, while updating
AR records is another separate responsibility.
Risk – If both tasks are combined it would also lead to fraud and material errors. A
person authorized to do both these tasks could steal cash and just manipulate the AR
records to conceal the event.
2. You own a online retail store for bulk orders of alcohols. Before an actual sale of
alcohols, your customers are required to create a customer account in "Request-Alcohol"
system. Per process, a customer information form (such as Name, Delivery Address,
Payment Option, TIN details) should be completely filled-out by the potential customer
in the system. Further, you also require them to upload any of  the following documents
before processing the creation of account - latest Income Tax return, valid ID for
individual,  or registration certificate for non-individual. Once form and docs are
uploaded, the request is directed to the Sales Department for checking accuracy and
completeness of customer information details. Once checked, a customer account is
created in "Request-Pro". What controls (application) can you set-up over customer
masterfile?
- Control – Tasks that would need to be segregated in manual systems are often
consolidated within computer programs. Management and accountants should therefore
be concerned about the integrity of the computer programs that perform these tasks. If
errors or issues with the programs are discovered the programmers who wrote the
original computer programs should not also be responsible for making program changes.
Risk – If both of these tasks are combined and assigned to someone, he/she can
manipulate the programs, get access to customer’s personal information’s and then use
them for fraudulent events.

Please prepare your answers a yellow pad/intermediate paper to be submitted  in our

next meeting
You can refer to Chapter 3-4 (week 3-4).pdf  for discussion on Internal Controls.