FIS

1. A critical control in the revenue cycle is the credit approval of a sales order before it is processed and filled. a. For proper segregation of duties, which department should perform this function? Why? ( 4 points) b. Describe specific information needed by the appropriate department to perform this function. (4 points) Credit Decision on a New Customer: Credit Decision on an Order from an Existing Customer: What is the risk to the company's operations (not accounting) that the credit approval control is attempting to reduce? ( 2 points) Another critical control in the revenue cycle is the preparation of the initlal check listing when cash payments are received from customers. a. For proper segregation of duties, which department should prepare this listing? Briefly explain. ( 2 points) b. The check listing and the actual checks are generally forward to an individual in the treasury department that acts as the cashier. 1) What is the primary role of the cashier? (2 points) 2) Identify the key documents that are prepared by the cashier. What is done with those documents? ( 2 points) c. Explain why it is critical that the account receivable clerk not be the individual who receives the checks and prepares the initial check listing. (2 points) d. Identify a control that is performed by the accounts receivable clerk that is designed to reduce the risk that checks received are not lost or stolen. (2 points) Explain the role of a lock box in the revenue cycle by answering the following questions. a. What is meant by a "lock box" as used in the revenue cycle? How is it used? Be sure to identify the party that has physical access to the lock box. (4 points) b. What is the financial benefit that a lock box provides to a company? (2 points) c. What risk is a company attempting to reduce by using lock box? ( 2 points) Piccirilli Manufacturing Company offers its customers credit terms of 3/15, net 30 to its customers, a. Identify a business purpose of offering such credit terms to customers, (2 points) b. Compute the annual percentage cost to Piccirilli Manufacturing Company of offering credit terms of 3/15, net 30 to its customers. (4 points) Annual Percentage Cost of Credit Terms Supporting Calculation Required: 3. Presented above is a flowchart that has appeared on old CPA exams. It depicts a manual cash receipts system. The flowchart contains some deficiencies that you will consider. a. The fowchart does not identify the destination departments for the symbols labelled as " 1 " and " 2 " above. Identify those destination department. ( 4 points) b. What does symbol " 3 " specifically represent? ( 2 points) c. The flowchart loses a document that was received by the cashier. What control should the cashier perform with that document thet is not depicted in the flowchart? (2 points) d. The flowchart does not depict a key document that the cashier would obtain from the bank. 1) Identify that document. (2 points) 2) identify which department should receive a copy of the document. Briefly explain why the department should receive a copy of the document received from the bank. ( 2 points) e. What does symbol "4" specifically represent? (2 points) f. Identify how symbol "4" would be represented if this system was automated. ( 2 points) 9. What does symbol " 5 " specifically represent? (2 points) h. Identify the key control that is represented in symbol " 6 " and briefly describe the purpose of that control. ( 4 points) What does the symbol with " D " in it likely represent? ( 2 points)