Revenue Cycle Controls

Presented below are descriptions of five controls in the revenue cycle followed by descriptions of seven risks that the controls are designed to mitigate. Match the controls with the risk that they are designed to reduce.

1) The credit department must approve credit for all sales orders before the orders can be processed and goods are picked, packed, and shipped.

2) The assistant controller periodically examines the open sales order file noting any orders that are 30 days outstanding to determine their status.

3) The payment processing department prepares a check listing for all customer receipts that it forwards to: the cashier with the customer check; accounts receivable with the remittance advices; and, general accounting.

4) Billing statements are sent monthly to customers. Customers are directed to contact the accounts payable clerk with All questions and complaints.

5) General accounting matches and compares copies of sales orders, shipping documents, sales invoices, and the sales journal summary prior to updating the general ledger.

Match each of the options above to the items below.

#? The risk that customer checks may be lost or stolen after their initial receipt

#? The risk of losses from customer accounts that become bad debt write-offs

#? The risk that customer orders shipped are not properly billed and recorded in accounts receivable

#?The risk that sales will be lost due to unfilled customer orders or unbilled shipments

#? The risk that thefts of cash receipts may be concealed by inappropriate entries in the accounts receivable records