REVENUE CYCLE

A. DFD
Credit
Records

A.

Receive
Order

Inventory
Subs.
Ledger

Check
Credit
Shipping
Log

Approv
ed
Sales

Update
Invento
ry
Records

Ship
Goods

AR Subs.

Bill
Custom
er

Sales Journal

Update
Accounts
Receivab
le

Journal
Voucher

Post to
General
Ledger

General
Ledger
Records

B. CURRENT SYSTEM FLOWCHART

C. INTERNAL CONTROL ISSUES

B.

Transaction authorization
a. Credit check no credit department, only sales representative. Also theres no
indication of analysis of the materiality of transaction for faster processing if the
amount is immaterial.
b. No return policy sales returns would not be processed faster and more
accountable because there is no return policy that was indicated in the process
c. Sales representative has the ultimate discretion of approval of the sales orders.
This may result in excessive inventory levels if all the approved sales orders

trigger the processing of the inventory.

2. Segregation of duties
C.
E.
D.

Accountabilit
y

I.

H.

G.
Does
F.
Asset
fraud requires
custody separate
collusion
from task of asset between two or
record keeping?
more
individuals?
Y = controls are present, N = controls not present, -

Transaction
authorization
separate from
transaction
processing?

= not applicable
J.

1. Sales
representati

N.

ve
2. Warehouse

clerk
R.

3. Shipping

clerk
V.
Z.
AD.

4. Billing clerk
5. AR clerk
6. GL

department
AH. 7. Cash
receipts clerk

K.

L.

M.

O.

P.

Q.

S.

T.

U.

W.
AA.

X.
AB.

Y.
AC.

Y
Y

AE.

AF.

AG.

AI.

AJ.

AK.

AL.
AM.
3. Supervision
a. Cash receipts processing does not have adequate supervision in receiving and
opening the mail.
b. There are too many employees staffed in the mail room, which can pose a risk of
familiarity, collusion, and lack of ultimate accountability
4. Access controls
a. Access to cash
i. Mail clerk has unrestricted access to the mail room without adequate
supervision
AN.

Hierarchy of major control issues of the company:

1. Supervision mail room

2. Segregation of duties see table above ( number 2)
3. Transaction authorization sales representative
AO.

RECOMMENDATION TO CONTROL ISSUES

AP.

Christian Alcera
AQ.

For transaction authorization, they must implement a system of purchase

order authorization. Also, they must hire a supervisor that will be help ultimately
accountable, especially in the mail room. They must also have independent verification of
the accuracy and completeness of the transactions transpiring in the sales representative.
Also, the billing department must have a controller that will supervise the material
changes in prices and charges to the customer invoice. There is also lack of audit trail;
invoices received are discarded after writing the check. They must maintain a file of
received invoices to maintain audit trail. Lastly, they must now consider to upgrade the
manual processing to computer based information system.
AR.
AS.

Antonio Ignatius
An analysis of their manual system is that they may be weak in processing
transactions in terms of time. Having a manual system may be more reliable as
compared to a computerized system however the time it takes to process the

documents takes time. As a book distributor, the company needs to process

transactions quickly so as to maintain customer satisfaction. When it comes to books,
customers demand that they be available immediately especially those who are in
need for academic purposes. So as recommendation, I suggest that the company
should be more of a computerized system.
AT.

Trixia Anne Resuello

AU.

In case of their supervision, they must have a controller, where the cash

receipts department usually reports that has the responsibility for financial assets. Also,
they must have an authorize person, to assist the checking and the flow of inventories in
the warehouse. And since the company encounters delivery delays, they must have a
carrier department so that inventories will be turned over to customers or to other
branches as fast as possible to prevent inventory stock out.

D. PROPOSED CIS FLOWCHART

AV.SALES PROCESSING SYSTEM
CUSTOME

SALES

COMPUTER OPERATIONS

WAREHOUSE

SHIPPING

AW.

D. PROPOSED FLOWCHART
AX.
MAIL ROOM

AY.

CASH RECEIPTS SYSTEM

CASH RECEIPTS
CASH RECEIPTS

A/R

GENERAL LEDGER