Chap09 Revenue

 Ateneo de Davao University School of Business and Governance Bradmark Comprehensive Case Revenue Cycle In Partial fulfillment of the Requirements In the Course IT Audit – IT

Presented to! Mrs. Mylene S. Caballero Professor 

Presented "y!

Course and Section! Date!

Bradmark Wholesale General Supply An ACL™ Case Study Bradmark is a wholesale general supply company that ships to business customers throughout  Northeast Pennsylania! New "ork state! and Southern Connecticut# Bradmark has deeloped a competitie edge by o$$ering a wide ariety o$ %uality products at competitie prices# &he company's products range $rom paint to watering cans# Bradmark is a publicly owned company! whose board o$ directors has retained your $irm to conduct the annual audit# "ou are the in(charge auditor who is currently e)amining Bradmark's reenue and e)penditures procedures and related accounts# Bradmark's main o$$ices are in its Allentown! PA warehouse# &he $ollowing describes your client's system con$iguration and  business procedures# System Overview and Background Bradmark's in$ormation system is a recently purchased application that runs on a client(serer network con$iguration# *ames Walker! a systems designer in Bradmark's +& department! played a central role in implementing and modi$ying the system to meet Bradmark's speci$ic needs# Because o$ Walker's $amiliarity with the system! he was asked by top management to temporarily oersee the initial running o$ the new system to en sure a smooth transition $rom the old legacy system# A$ter seeral months! *ames Walker was o$$ered a promotion to Warehouse ,anager and gien permanent responsibility $or product purchasing# Sales and Cash Receipts Procedures &he $lowchart in -igure . and the record layout in -igure / 0see the related PowerPoint $ile $or $igures1 illustrate Bradmark's sales and cash receipts procedures#

Sales Department  Customer orders are receied by mail or $a) in the sales department# 2ne o$ the sales sta$$ accesses the customer record and reiews the a ailable credit be$ore creating a Sales +noice record# -or customers with insu$$icient aailable credit! the clerk submits the order to the credit manager $or approal# +$ granted! the credit manager erbally authori3es the clerk to increase the customer's line o$ credit accordingly# -or approed sales! a record is added to the Sales +noice $ile# &he system automatically assigns an +noice Number! which is the primary key $or the record# &he clerk manually enters the remainder o$ the order data#

Warehouse Based on input $rom the sales inoice! the warehouse terminal automatically prints a stock release document! which the warehouse sta$$ uses $or picking the goods# &he goods are sent to the Shipping 4epartment along with the stock release document# 2nce the goods hae le$t the warehouse! the clerk con$irms to the system the %uan tity sold and it automatically updates the 5uantity on 6and $ield in the respectie inentory record# Shipping Department 

&he shipping department receies the goods! prepares them $or shipment! selects a carrier and  prepares the packing slip and bill o$ lading 0B2L1# 2nce the goods are shipped! the clerk adds a record o$ the shipment to the Shipping Log $ile#  Billing  At the end o$ the day the system automatically searches the Sales +noice an d Shipping Log $iles $or items shipped and prepares a hard copy customer inoice! which is mailed to the customer the $ollowing morning# &he current date is then placed in the 4ue 4ate $ield o$ the Sales +noice $ile#

Cash Receipts ,ary! the cash receipts clerk! receies the customer checks and remittance adises directly $rom the customer# She records this transaction by entering the +noice Number 0taken $rom the remittance adice1 into the system# &he system automatically creates a Cash 7eceipts record# +t assigns a 7emittance Number as the primary key a nd adds this number to a $ield in the related Sales +noice record# &he +noice Number $rom the Sales +noice is also added to the remittance record as a re$erence# ,ary then manually adds the customer number! amount! and payment date to the Cash 7eceipts record# At the end o$ the day she prepares a deposit slip and sends the checks to the bank# She $iles the remittance adice in her o$$ice# Risk Assessment Procedure (Analytical Procedure) nderstand the entity! industry! and environment (Business Risk " #nherent Risk) By revie#in$ the Com%any "ac&$round' u sing the matri) $ormat below identi$y an operational

0business1 risk related to the reenue cycle# Brie$ly describe the audit ob8ectie and ACL  procedures to answer this concern# Operational/Audit Risk (indicate which) 9)amples: process e$$iciency! $raud! losses due to errors

Operational/Audit O!ective

Audit Procedures to e Per"ormed #sing AC$

Control Risk Assessment () System Documentation "y usin$ *lo#charts a) Com%are the dia$ram of the current system or e+istin$ system #ith the dia$ram on ho# the system should #or&! Revenue cycle – sales %rocessin$, cash recei%ts

0+nsert here the two diagrams: a1 the current system or e)isting system; and b1 the corrected system ( how the system should work1

 b1