Cash Receipt Stream in Revenue Cycle

PART I
CASH RECEIPT STREAM IN REVENUE CYCLE
In the given case, following the cash stream overview flow, we can see that the as soon as the
receipt is deposited in the bank, an update is made in the ledgers. This has a moderate risk
because there is no reconciliation period between the deposit and the update on the ledger. The
check received and deposited may get dishonoured for any reason but the accounts has already
been updated. In such a scenario, the management will only get to know when there is an update
from the bank. This is a moderately risky affair.
a. The accounting process
The accounting process should have an intermediate step where there will a period of test check
when there can be a clarification whether or not the check got cleared. If the check is cleared it
can then be updated in the ledgers, on the other hand if the check gets dishonoured, the accounts
will be updated accordingly. Thus, there should be an intermediary process where the bank
verification would be carried out and a reconciliation statement where the party ledger, general
ledger and the cash ledger should be updated with a note on the update of the check.
b. The control procedure and management assertions covered by each control
In this entire case, there is no system of bank reconciliation. There should be a reconciliation
period which is very important because that will help Ownco minimize the risk of not getting
their payments honoured by the bank.
c. The key controls that are in place including # of key controls for each stream
The key control that are in place in the Cash Receipt Stream are making a list of all the checks
and remittances, getting deposit slips receipted from the bank, checking the receipts received
from the bank with the list made earlier and updating the transaction on the ledger accounts and
files. These key control are in place.
d. The missing key controls
One of the important key control is the intermediary period between matching the bank receipts
with the checks and updating the accounts of the computer system where the bank reconciliation
statement needs to be prepared. This key is missing that should be added to it. A reconciliation
statement is very important for the management to make no mistake of adding receipts on the
system while updating the ledger accounts that the bank cancelled.

e. Separation of duties
A separate individual should be placed for each of the important steps. In this case, the secretary
looks after the checks and the remittance. The book keeper updates the accounts on the
microcomputer. A new individual should be appointed to look after the reconciliation statement
throughout the intermediary period so that he has his own individual confirmation. Every duty
should be separated and cleared for every individual working in this process.
SALES STREAM IN REVENUE CYCLE
In the sales stream, there are two changes that needs to be made. The two changes or additions
are:
In the sales process, after the customer sale order has been placed and before the shipping of the
good, there should be a stock confirmation. Parallel to this stock confirmation, there should be a
confirmation call to the customer. The stock confirmation in the warehouse will confirm if the
required amount of stock is available for shipment. If the required sock is not ready then there
will be a scope to let the customer know about the period of time that might be required for the
shipment to take place. If the customer agrees with the delay in time, only then the shipment will
be done and the sale invoice will be will be updated in the accounts of the management. These
two processes is very important and should be included in the process.