Accounting Information System Analysis: RCE Limited Revenue Cycle

This report provides an analysis of the accounting information system and revenue cycle of RCE Limited, a Queensland-based wholesaler. The report examines the existing revenue cycle, focusing on sales order processing and cash receipt procedures, and identifies potential internal control weaknesses within these processes. It discusses the risks associated with these weaknesses, including employee theft and financial management fraud. The report also explores different types of fraud that RCE Limited might face, such as false representation, material fact issues, justifiable reliance concerns, and injury and loss claims. The conclusion emphasizes the importance of strong internal controls to mitigate these risks and protect the company's financial health.

Analyzing an Accounting
Information System

EXECUTIVE SUMMARY
Accounting information systems (AIS) are instruments and systems that gather and
present financial statements so that auditors and management can make educated decisions. It is
regarded as a critical part in finance departments all over the world. The technologies are also
software-based and can be integrated with a corporation's IT infrastructure. This Report based on
the RCE limited RCE Limited is a wholesaler of rafting and hiking facilities situated in
Queensland. RCE Limited, in specific, adheres to recreational activities and camping stores
across Queensland. In this report identified risks and frauds that arise in the company and
analyzed revenue cycle.

Contents
EXECUTIVE SUMMARY.........................................................................................................................3
INTRODUCTION.......................................................................................................................................5
MAIN BODY..............................................................................................................................................5
1. Discuss this statement in the light of existing revenue cycle of RCE Limited.....................................5
2. Describe potential internal control weaknesses in the sales order processing procedures and cash
receipts procedures of RCE Limited........................................................................................................7
3. Discuss the potential risks associated with the internal control weaknesses........................................7
4. Types of Fraud.....................................................................................................................................8
CONCLUSION...........................................................................................................................................9
REFERENCES..........................................................................................................................................11

INTRODUCTION
Accountants, advisors, financial experts, administrators, accounting professionals
(CFOs), inspectors, supervisors, and tax establishment may use an accounting information
system (AIS) to accumulate, records, handle, analyze, extract, and record customer documents.
Qualified professional auditors collaborate intimately with AIS to achieve the highest degree of
consistency of a commercial organisation and monitor, and also to make financial records readily
accessible to all who require it while maintaining data integrity and security (Ugoani, 2020). This
report based on the RCE limited which is a Queensland based wholesaler which deals with
rafting and camping equipment. In this report consist of revenue cycle of RCE limited, discuss
about the sales order processing and cash receipt procedure. Moreover, define the risks related
with the internal control weakness recognized in RCE limited.
MAIN BODY
1. Discuss this statement in the light of existing revenue cycle of RCE Limited.
“The additional cost required establishing separate departments for warehousing, shipping and
inventory control is considered a necessary cost for the added benefit of control over inventory.”
The Revenue cycle is a series of ongoing commercial processes and related information
management functions involved in delivering products and services to consumers and receiving
payments made. People are the key source of external intelligence. It's referred to as
"transactional." RCE Limited is a wholesaler of rafting and camping supplies based in
Queensland. RCE Limited, in particular, caters to outdoor activities and camping stores across
Queensland. Mr. Chris Doubler has decided to join RCE Limited's finance team as the
department's director. Mr. Doubler collected a variety of data from the department using a
variety of sources in order to boost procedures. It is saying that additional cost required for
separate departments like sales department and cash receipt department (BULAT, 2019).
Sales department: Customers are encouraged to forward instructions to the sales
department in any format, like postal, e-mail, or fax. Such sales orders are first converted into

standardized sales orders by the sales clerk. The sales representative demands any missing
details, if there are any, for this reason. (Please note this incomplete detail in light of our
conversation mostly during Immersive Tutorials.) Whenever the order is sent, the sales clerk
uses his desktop computer to verify the customer's financial health. These notes are accessible to
the warehouse manager. The flooring installer publishes the purchase order, inventory transfer,
and shipment note for further processing. A warehouse clerk selects the desired goods from the
shelf using the stock released copy and transfers them, along with the stock release and the
delivery note, to the sales department. The warehouse staff then uses his desktop console to
update the sales invoice ledger and the customer account management account (Li, 2019).
Cash receipt department: Customers' checks are sent to the specific mailroom along with
all mail. The postal clerk is responsible for a variety of duties, including arranging mail,
processing customer payment envelopes, extracting customer checks and remittance tips, and
resolving these data sheets. The clerk manually makes two printed copies of a transactions list to
keep track of the reviews and remittance guidance. A corporation's warehouse expenditure is
typically substantial, as it can be made up of several retail pieces that can be easily robbed and
sold back (Osmyatchenko and et.al, 2019). If the stock is mostly made up of raw resources,
taking care of it is crucial to achieving that the manufacturing operations that rely on it do not
run out of components. This ensures you'll need to put in place a variety of safeguards, either to
deter fraud or to ensure the production process doesn't run out of materials. We'll go through a
few of the main controls to think about inventory expenditure down below. Internal inventory
controls are important.
REVENUE PERFORMANCE EVALUATION: When measuring revenue cycle
efficiency, the average collection duration is often used. In addition to maximizing shareholder
value, the normal recovery duration is the time needed for a company to recover refunds owed
from its customers (AR). The average collection time is used by businesses to ensure that they
have sufficient working capital to fulfill their financial commitments (Changwony and Paterson,
2019).

2. Describe potential internal control weaknesses in the sales order processing procedures and
cash receipts procedures of RCE Limited.
RCE Limited which faces stock-outs, holding cost, and price cuts due to a lack of a
proper protocol for testing stock levels. The warehouse clerk may have difficulty choosing the
goods if the warehouse staff copies the necessary documentation without any input from the
inventory monitoring report. This is most often seen when the demanded items are out of stock.
The company has to pay carrying costs over time as a result of the product sourcing. Stock-outs
can be avoided by implementing a mechanism that alerts the warehouse team when each item's
amount of inventory has been reached (Handayani, 2020).
The method of the sales clerk testing customers' financial health exposes the possibility
of sales to customers with bad credit. Since RCE Limited does not hold their deposits, the list
received from the finance department does not include the names of current clients. Sales to
consumers with bad reputation are more likely to result in bad debts. The corporation will use IT
approaches to boost the state of ability to repay checks for customers. For example, savings rates
and balances may be automated, allowing the sales department to review each client's credit
rating. Messages to the credit officer for accounts requiring special authorization will also help to
reduce the harm. The weakness in the cash receipt process will lead to the possibility of
illegitimate orders. Invalid orders may arise from mail clerk errors in planning the money
transfer list, particularly where unauthorized payments are included. RCE Limited may be
exposed to the possibility of completing orders that were not ordered by consumers. The
treasurer's and mail clerk's reliance on each other will increase the chance of fraud (Li and Yang,
2019).
3. Discuss the potential risks associated with the internal control weaknesses
Due to RCE Limited's vulnerabilities in the CRP, there is a chance of theft of currency,
consumer credit, and other assets. The treasurer's manual reports may be vulnerable to theft.
Because the bank relies on the treasure procedures adopted by the treasure, any mistake or
deliberate mistake will result in credit card fraud. Consumers remit directly to the bank, and the
bank notifies the accounts receivable department about the exports. The development of an
online list for authentication would be facilitated by the use of a bank money transfer scheme
(Qasim and Kharbat, 2020).

Employee theft will arise as a result of the threats involved with the SOPP and CRP of
RCE Limited's internal management vulnerabilities. Theft by employees has a detrimental
impact on company processes and production. Specifically, the treasurer may embezzle finances
whilst individually logging deposit slips. RCE Limited would incur a financial loss unless the
treasurer omits any of the investments and transfers them to his bank. These losses may have a
substantial impact on a company's activities, particularly if the company has to generate new
funds to cover its operational costs. Employee theft may be compounded by the lack of adequate
internal control mechanisms. Employees will commit theft by exploiting the system for personal
benefit, resulting in financial loss for the company (Beerbaum and Puaschunder, 2019).
Financial management fraud can occur as a result of SOPP and RCE Limited's internal
control vulnerabilities. Due to the fact that the majority of the divisions are led by people,
collaboration among them may result in financial fraudulent activities. For example, deception
between the main clerks and the treasurer may result in the bank and the accounts receivable
department receiving a false money transfer database. Due to the existence of legislation and
requirements, financial management fraud may happen. Financial fraud is caused by manager's
involvement in illegal practices, which can have a direct impact on the company's results. To
discourage financial management theft, the corporation should use an internal controls. The
separation of duties would aid the corporation in dealing with bribery risks, improvements in
compliance controls, collusion, and IT changes. Through reducing overdependence on persons in
different agencies, financial accounting misconduct may be managed. Separation of duties
allows managers to guarantee where each division leads to the successful execution of a
transaction, reducing reliance on a single department or employee (Qasim, El Refae and
Sannella, 2020). The primary goal of insisting on proper internal management protocols is to
avoid illegal practises from occurring. Financial accounting abuse and employee theft are
examples of shortcomings in SOPP and CRP in RCE Limited's internal controls.
4. Types of Fraud
False Representation: False representation fraud occurs whenever someone renders a
false or deceptive representation with the potential to gain or injure another person. A definition
is considered "false" if it is deceptive or outdated, and the person who is giving it is conscious
that it is deceptive or untrue. A "representation" isn't established in any way other than to say that

it's a fact or a law. The nearest synonym is a "statement," whether voiced, written, or implied
(Moll and Yigitbasioglu, 2019).
Material fact: The most critical detail in a situation is the material evidence, which is
closely related to the dispute at hand. Material evidence in an insured fraud case, for instance,
may be something about the insurer's liabilities, scheme, or coverage. If evidence is material, it
would almost certainly have an effect on the case's outcome in court. The following are the
elements that must be present in order to create a prima facie case of criminal deception: The
offender should be required to report a material related fact to the complainant if the defendant
failed to do so, and the plaintiff was harmed as a result of the defendant's failure to do so
(Ikechukwu Nwanji and et.al, 2020).
Justifiable reliance: Fraud is described as a fraudulent act committed knowingly by one
person in order to persuade another person to enter into an agreement. Misrepresentation is
described as the intentional making of a false statement in order to convince the other person to
enter into an agreement. A person's justifiable dependency on another's perceptions is referred to
as justifiable reliance. If any person with equal intellect, knowledge, or expertise would not have
depended on the supposed portrayal, so reliance is not justified (Almomany and et.al, 2020)
(Hasyim and Jabid, 2019).
Injury and loss: An act designed to force an insurance insurer to pay you for an incident
that is nonexistent, exaggerated, or incidental to any accident protected by the policy is generally
described as due to injuries insurance fraud. Actions meant to mislead the insurance provider to
force it to pay for inflated or non-existent accidents are the most common types of fraud. Seeking
money for injury or losses that are due to an event protected by the insurance scheme is
dishonest. In RCE limited face this loss because of people claim loss in regard of their injury and
asked to pay from manager (Almasan, Circa, Dobroszek and Zarzycka, 2019).
CONCLUSION
As per the above report it has been concluded that an accounting information system is a
means for an organisation to keep track of both accounting and economic operations. Resources,
processes and orders, records, applications, computing technology equipment, and security

auditing are the six major elements of accounting information systems. Each element is broken
down the process following.

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