Tuesday 2/8/2011
Agenda:
1) Handback Project
2) Handback Midterm
3) Quiz #1
4) Student questions
5) Revenue Cycle
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Project Results
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Overall, Very good job
Mean = 45.5 (91%); Median = 46
High = 49; Low = 41
Comments
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Midterm Results
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A lot of material covered.
Overall, about what I expected (good)
Mean = 79.3 (79.3%); Median = 79
High = 96; Low = 56
Comments
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Quiz #1
Due by 4:30 pm Thursday 2/10/2011
1. Answer the 10 multiple-choice questions on pgs.
390 & 392 of BAS 2007 AND
2. Discussion Questions (pg. 391): 1, 2, & 3 AND
3. Question 4 “What does >LL mean/do in a custom
Input Mask?”
Please hand in hardcopy OR cut and paste answers into
the body of an email. Quiz is worth 20 points.
I have posted the above directions on class website (Messages to Students)
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QUESTIONS ????
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Revenue Cycle
[Sales order entry—Shipping—Billing & A/R—Cash collections]
AIS must provide adequate controls so that the
following objects are met:
(1) Transactions are properly authorized.
(2) Recorded transactions are valid.
(3) All valid, authorized transactions are accurately
recorded.
(4) Assets are safeguarded from loss or theft.
(5) Business activities are performed efficiently and
effectively.
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Achieving the objectives
The following help achieve the objectives:
• Simple, easy-to-complete documents with
clear instructions.
• Appropriate application controls (e.g.,
validity or field checks).
• Signature space for persons responsible for
completion and review of documents.
• Prenumbering of the documents.
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Revenue Cycle—Major threats &
control
(1) Sales to customers with poor credit—(uncollectable
sales and losses due to bad debts). Prevention—
independent credit approval function and good
customer accounting.
(2) Shipping errors—wrong quantities, items, or
address: mad customers. Prevention—reconcile
shipping notices and picking tickets, bar code
scanners, data entry controls.
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Major threats & control (contin.)
(3) Theft of inventory—loss of assets ----> inaccurate
records. Prevention—Secure inventory and
document transfers, good accountability for
picking and shipping, and frequently reconcile
records with physical count.
(4) Failure to bill customers—loss of inventory, and
erroneous data about: sales, inventory, and
receivables. Prevention—Separate shipping and
billing. Prenumber of shipping documents and
reconciliation of all sales documents.
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Major threats & control (contin.)
(5) Billing errors—pricing mistakes, overbilling for items not
shipped or back ordered—loss assets and mad customers.
Prevention—reconciliation of picking tickets and bills of
lading with sales orders, data entry edit controls, and price
lists.
(6) Theft of cash—loss of assets and overstated A/R.
Prevention—separation of duties: handling cash and posting
to customer accounts; handling cash and authorizing credit
memos & adjustments; issuing credit memos and
maintaining customer accounts. Use lockboxes and EFT.
Mail customer statements monthly. Use cash registers in
retail. Deposit cash intact daily in the bank. Bank
reconciliation done by noncash handler.
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Major threats & control (contin.)
(7) A/R incorrectly posted—mad customers, incorrect records,
and poor decisions. Prevention—reconcile sub. A/R ledgers
with general ledger, monthly stmts. to customers, and edit
and batch totals.
(8) Loss of data—loss of confidential info., and poor decision
making. Prevention—regular on-site & off-site backup,
logical and physical access controls to prevent leakage to
competitors.
(9) Poor performance—inefficient and ineffective operations.
Prevention—sales and profitability analysis, A/R aging, and
cash budgets to track operations.
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REVENUE CYCLE:
INFORMATION NEEDS
AIS needs to provide useful information about:
• Customer inquiries about account balances and order status.
• Extension of credit to specific customers.
• Inventory availability.
• Credit terms.
• Prices
• Sales returns and warranty policies.
• Alternative merchandise delivery methods.
• Strategic and performance evaluation information.
..................this is valuable stuff. See next slide::
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Strategic and performance
evaluation
Some useful measures (metrics) include:
 Response time to customer inquires.
 Time to fill & deliver orders.
 % of backorders.
 Customer satisfaction.
Overall revenue cycle performance measure =
Revenue Margin = GM – all selling costs
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REA revenue cycle data model
• Resources—cash and inventory.
• Events—orders, shipments, billing, and cash
collections.
• Agents—primary external agent is the
customer, various internal agents.
A/R in the data model: balance is the difference
between sales and cash collections for sales.
No need for an A/R account (file). But…..
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Benefits of the data model:
• Integration of traditional accounting data and
operational data.
• Additional data such as the time of day of a sale can be
collected, analyzed and used in decision making.
• Links of internal and external information (e.g., credit
ratings) is possible.
• Flexible/powerful query by SQL if relational DB.
• Data mining for target marketing.
RDB allows you to slice and dice data in any way that
you want. This was not possible with a non-RDB.
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Internal control and databases:
• Foreign key and referential integrity ensures the
existence of primary key records in related tables.
• Effective access controls are very important in a
database environment.
• REA diagrams highlight incompatible functions and
system can be programmed to reject any attempt to
perform incompatible functions by a single employee.
When multiple roles are performed, auditors can
check for compensating controls.
• Use of DBMS makes backup and disaster recovery
procedures essential.
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