Receivables Monitoring..contd..
CO: The receivables from the customer are managed within the Company’s norms
RS: Information on receivables is not available.
CN: Age analysis report of receivables is generated by each Unit and forwarded to Unit Coordinators.
Days Sales Outstanding (DSO) is presented and discussed in the Monthly Sales Meeting.
CO: Timely collection of accounts receivable is monitored.
RS: Doubtful accounts have not been appropriately identified and considered.
CN: Accounts receivable aging reports are prepared regularly and analyzed by management.
Customer open items reports are prepared and analyzed by management.
6.Collections...
a. CO: Cash receipts are accurately recorded.
RS: The amount of cash receipts are inaccurately recorded.
CN: Accounts Manager approves the amount recorded on review.
b. CO: Cash receipts are accurately recorded.
RS: Cash receipts are recorded in the improper period.
CN: "Accounts Manager approves the amount recorded.
Cut off procedures and close procedure are implemented"
c. CO: Cash receipts are accurately recorded.
RS: The entity's bank statements are inconsistent with that recorded by the bank.
CN: Regularly reconcile recorded balances and activities with balances and activities reported by its banks.
d. CO: Cash receipts are accurately recorded.
RS: Inappropriate access to receive and record cash receipts.
CN: Access levels are pre-defined based on clear job responsibility.
e. CO: Cash receipts are accurately recorded.
RS: Cash receipts are not protected before they are deposited.
CN: Cash receipts are stored in a manner which protects them from physical destruction or manipulation. Backups of cash receipts are made.
f. CO: Cash receipts are recorded in the period in which they are received.
RS: Cash receipts are not recorded in the period in which they are received.
CN: Cash sales are recorded using a cash register. Customers are provided with a copy of the register receipt and total daily receipts per the register are balanced to cash deposited to the bank. 7/7/09 deepti
CO: Cash receipts are accurately recorded.
g. RS: Cash receipts are accurately calculated and recorded
CN: Available cash discounts are automatically calculated by the application system, using standard programmed algorithms and established terms of sale.
Cash receipts should be generated in duplicate a sign off from the recipients should be taken
h. CO: Cash receipts are accurately recorded.
RS: Cash receipts do not relate to sales and/or are not recorded against the correct customer or invoice.
CN: Reconciliation of subsidiary ledger accounts receivable and sales ledger balances to general ledger balances or other control totals on a regularly scheduled basis.
i. CO: Cheques received are deposited promptly.
RS: Cheques and drafts may not be deposited immediately on receipt
CN: "Cheque and draft received are recorded in the collection register and deposited in the Bank the following day.
Deposit slip is reconciled with the days collection register"
j. CO: Cheques received are timely Credited Company's Bank Account
RS: Cheques deposited may not be credited on time.
CN: The AR Team verifies the daily transaction report of the Bank to ensure all cheques deposited by are credited on time.
k. CO: Timely accounting of Sales realizations.
RS: The Sales realization may not be accounted on timely basis.
CN: Sales collections are accounted in the accounting system on receipt of credit in Bank Account based on the daily transaction report.
l. CO: Export Realization are collected and accounted on time.
RS: The Export realization may not be accounted immediately resulting to overstatement of debtors.
CN: "The AR Team will send the documents to the Bank for collections through banking channel. The Executive - AR is maintaining a Excel Control Sheet to ensure that the documents are sent to the Bank on due date.
Based on Excel Control Sheet, the AR Team monitors receipt of credit in Bank on timely basis.
Foreign exchange realization are accounted on receipt of Bank Advice."
7. Sales Return..
CO: Sales Return are authorized and recorded
RS: Acceptance of returned goods may not be authorized
CN: "Customers are instructed to obtain authorization from responsible management prior to returning goods (i.e. RGA number) and affix the RGA number to the packing slip.
Returned goods authorizations are matched to incoming goods prior to acceptance.
b. CO: Sales Return are authorized and recorded
RS: Returned goods transactions may not be recorded, or may not be recorded in a timely manner.
CN: "Authorizations for goods returned are matched with receiving reports and are numerically or otherwise controlled in a manner that ensures all sales returns activity has been recorded.
Returned goods are booked in the general ledger upon receipt.
Returned goods are periodically compared to their related general ledger account balance.
c. CO: Sales Return are authorized and recorded
RS: Returned goods may be mishandled, misappropriated, or damaged. "
CN: Returned goods are physically segregated upon receipt (i.e. returned goods area for product inspection). Further, free issues are made against the returned goods received back in office. (Attempt to be made in issue of Cr Note be avoided)
Access to returned goods is restricted to authorized personnel
Returned goods are adequately protected from adverse environments (i.e. returned goods will not be mistakenly stocked into inventory).
8. Credit/Debit Notes
a. CO: To ensure that the Credit notes are raised after the necessary approval
RS: Unauthroised Discounts may be passed on to the Customer.
CN: Customer eligible to discount and the percentage is decided by a Committee
b. CO: To ensure adequate approval for Credit/ Debit Notes raised
RS: Credit /Debit notes may not be adequately authorized
CN: All credit/debit notes are reviewed by the respective Account Managers and approved by the Head of Accounts
c. CO: Credit notes and adjustments to accounts receivable are accurately calculated and recorded.
RS: Credit notes and adjustments to accounts receivable are not accurately calculated and recorded.
CN:
1. Management approves credit notes, bad-debt write-offs, and other adjustments to accounts receivable.
2. Management monitors the nature, volume and amount of recorded credit notes, write-offs, and other adjustments to accounts receivable.
3. All returned goods are logged when received. The log details items such as customers, goods, defects, inspections and assessment by quality control. Return details per the log are compared to credit notes issued to ensure that credit is issued in the correct period and in accordance with company policy.
d. CO: Credit notes issued are recorded in the appropriate period.
RS:
1. "Goods returned by customers are not recorded in the appropriate period.
2. Credit notes issued are recorded in the wrong period resulting in misstated receivables"
CN: Goods returned by customers at, before, or after the end of an accounting period are scrutinized and/or reconciled to ensure complete and consistent recording in the appropriate accounting period.
9. Bad Debt Provision & Write-off
a. CO: Bad debts are analyzed, minimized and approved.
RS: Bad debts may not be recognized
CN:
1. "Review of the debtor balances and their recoverability is done on a monthly basis by the accounts department and the related Account managers.
2. A Policy should be laid down by the company describing the period after which a debt should be recognized as bad
3. Any amount not recoverable as per such policy is transferred to bad debts which is authorized by Head Accounts"
b. CO: Bad debts are analyzed, minimized and approved.
RS: Bad debts are not formally approved and analyzed.
CN:
1. The request for Bad Debts is prepared by the Sales Team which is signed by the concerned Sales Manager on review
2. The reason/ justification for Bad debts is recorded and documented on the request.
3. The request for Bad Debts should be approved as per the Delegation of Authority Matrix.
4. The copy of approved request is sent to Accounts Department to ensure adjustments in the Books of Accounts.
c. CO: Bad debts are analyzed, minimized and approved.
RS: Account write-offs may be unauthorized or improper
CN: "The controller’s approval is required for all write-offs of uncollectible receivables, and the write-off for uncollectibility is against the reserve for bad debt.
Accounts written off are periodically reviewed for subsequent collectibility."
d. CO: Bad Debts provision are adequate
RS: The provision for uncollectible accounts receivable may be inappropriate.
CN:
1. Specific criteria are used in determining the appropriate level of bad debt reserve (historical trends, specific problems, industry experience, etc.).
2. Accounts receivable are aged and reviewed by Accounting personnel on a regular basis (i.e., Independent of Credit). Overdue accounts are promptly investigated.
3. The adequacy of the bad debt reserve is analyzed at least quarterly and reviewed by management
e. CO: Account write offs are approved by appropriate management
RS: Accounts may be inappropriately written off
CN:
1. Accounts and notes receivable, disputed items& bad debts written off and recoveries of bad debts are reviewed by appropriate management
2. Reports of all provisions and write-offs are reviewed by an appropriate independent employee
3. Access to effect write offs of customer accounts is appropriately restricted to authorized personnel
10. Revenue recognition
a. CO: Corporate Accounting Policies & Procedures for revenue recognition are adhered to.
RS: Revenue may not be recognized in accordance with Corporate Accounting
Policies/Procedures
CN: Detailed policies and procedures exist governing the recognition of revenue and include reference to Indian GAAP and are updated on a timely basis and distributed.
b. CO: New product introduction - Incentives are appropriately considered for revenue recognition implications
RS: Incentives provided for new product introductions are not appropriately considered for revenue recognition implications
Unusual transactions and/or new contracts may not be reviewed for revenue recognition implications
CN: "Procedures exist to ensure review and approval of new or modified sales terms and contracts by commercial, accounting, and legal personnel
New contracts and/or unusual transactions are reviewed by Finance for appropriate accounting treatment. A process to generate exceptional report relating to unusual transactions should be existing."
c. CO: Sales returns provision is recorded in accordance with provisions of Indian GAAP
RS: A provision for sales returns may not be appropriately calculated and recorded.
CN: "A reserve for sales returns is recorded in accordance with Corp. Policy.
Reserve calculations are reviewed and approved by appropriate individuals on a periodic basis using up-to-date information."
c. CO: Promotional/sales incentive programs are approved by Management and reviewed by Finance for revenue recognition implications.
RS: Incentives provided for new product introductions are not appropriately considered for revenue recognition implications
CN: Promotional programs are reviewed and approved by appropriate senior financial, marketing and general management based on designated authority levels prior to implementation (the amount approved is based on total financial impact of discounts, extension offers etc.)
d. CO: Promotional/sales incentive programs are approved by Management and reviewed by Finance for revenue recognition implications.
RS: Incentives provided for new product introductions are not appropriately considered for revenue recognition implications
CN: Promotional programs are reviewed and approved by appropriate senior financial, marketing and general management based on designated authority levels prior to implementation (the amount approved is based on total financial impact of discounts, extension offers etc.)
e. CO: Revenue is only recognized once title and risk of loss have been transferred to the customer.
RS: Revenue may be recognized before title and risk of loss have transferred to the customer
CN: "Shipping terms are clearly defined. (Typically these are FOB Destination or FOB Shipping)
Management has reviewed sales contracts (terms & conditions) to determine when title and risk-of-loss have transferred and revenue is not recognized until the risk & rewards are transferred."
f. CO: Other income is properly recorded and classified
RS: Gains on sales of assets or up front payments received from distributors may be incorrectly recognized and classified
CN: "Procedures exist to record gains on sales of assets net of the asset book value in ""Other Income""
Procedures exist to record up-front payments received as part of distributor agreements as ""Other Income"" over the life of the contract."
g. CO: Revenue is only recognized for sales on credit when collectibility is reasonably assured
RS: Revenue may be recognized when collectibility is not reasonable assured.
CN: Procedures exist for credit & collections personnel to identify customers in bankruptcy and inform finance. The recognition of revenue is deferred until the goods are paid for or collections is otherwise reasonable assured.
h.CO: Sales are periodically evaluated to determine whether they should be accounted for as consignment sales.
RS: Sales which represent consignment sales may be improperly recognized as revenue.
CN: An analysis is periodically performed by the Appropriate Authority to determine whether sales should be accounted for under the consignment method. (Circumstances which should be evaluated include when shipments were a result of incentives, shipments would cause excess inventory levels relative to the wholesaler's ordinary course of business inventory level, where the Company would extend incentives based on levels of excess inventory in connection with future purchases and where incentives would cover substantially all, and vary directly with, the wholesaler's cost of carrying inventory in excess of wholesaler's ordinary course of business inventory level).
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