P12.6 Essay

12.6. Create a questionnaire checklist that can be used to evaluate controls for each of the four basic activities in the revenue cycle (sales order entry, shipping, billing, and cash collections).
A.) For each control issue, write a Yes/No question such that a “No” answer represents a control weakness. For example, one question might be, “Are customer credit limits set and modified by a credit manager with no sales responsibility?”
B.) For each Yes/No question, write a brief explanation of why a “No” answers represents a control weakness.

A.) Questions Yes No
1.) Are picking list quantities compared to sales orders?
2.) Is access to master data restricted?
3.) Does a backup and disaster recovery plan exist?
4.) Have backup procedures been tested within the last six month?
5.) Are digital signatures required for online orders?
6.) Are shipping documents reconciled with sales orders?
7.) Is physical access to inventory controlled?
8.) Are appropriate data entry edit controls used?
9.) Are monthly statements sent to customers?
10.) Are the shipping and billing functions performed by different employees?
11.) Are the credit approval and sales order entry duties performed by different employees?
12.) Is the master data regularly checked and all changes review thoroughly?
13.) Is sensitive data encrypted while stored in the database?

B.) Explanation for a NO answer
1.) Not checking the picking list to sales orders can result in wrong product or the wrong amount shipped to customers.
2.) Unrestricted access to master files could allow fraud by letting employees to change information to hide theft.
3.) An organization could lose important information if a backup and recovery plan is not in place.
4.) Back up