Total Accounts Receivable

Bradmark Wholesale General furnish ACL Case Study This paper contains the analysis of the details and gos of the size up assays on Bradmarks R thus farue and usance Cycles. The audit tests were performed through the ACL Program. 2005 Rachelle Cultura Trixia Ebol Christine Fonseca Mary Rose Samas Nadaine Tongco Ross & Specter Co. October 24, 2012 1 P a g e REVENUE CYLCE Assessment of Internal Controls over the Revenue Cycle The assessment of Bradmarks intragroup controls over its revenue unit of ammunition procedures were shake through the analysis of the processes individually department is undertaking.For the gross gross sales Department, it is save craft that the salesclerk will seek the compliment of the computer address manager for customers with insufficient for sale credit. However, the credit manager should non except verbally authorize the clerk to transmit credit limits. More so, it is inappropriate for him to ascribe the said task to the clerk as it violates the general control of authorization. Reconciliation of the documents wadding slip, shipping nonice, and bill of lading with the goods to be shipped must likewise be d matchless for independent verification.Several copies of these documents must be make to be filed for future reference and monitored by the departments responsible in the each of the functional processes. In conclusion, Bradmark needs to improve more or less of the internal controls over its revenue rung procedures. Existence or Occurrence From Bradmarks entropy files on sales invoices, coin receipts and list of customers, the ACL softwargon was utilize to compute and determine the Accounts receivable counterweights of customers in the books. January 20, 2005 coupled City 920 4 h Street Bridgewater, New Jersey 8807 respec verificationle Sir/Madam, In connection with an examination of our m unrivaledtary statements by Ross & Specter Co. , Certified open Accountants, 8th Avenue, Manhattan , New York (NY) 10014, we will notify it if you will indicate the cook upness of the pursuit information. Our records indicate that, at the close of business on December 31, 2004 the bill compriseable on your account was $8,627 Please get the incumbrance- come in procedure form in the length provided under if this amount agrees with your records.If it does not agree, do not sign below but explain and sign on the hold back side. Please return this form straight to our accountants in the enclosed envelope. Very really yours, Ross & Specter Co. Confirmation Information is absolute ________________________________ Signature and date 2 P a g e In request to verify the existence or occurrence of what these accounts actually owed to Bradmark, confirmation letter were sent to certain customers. Customers with unpaid sense of balances in the records authorized confirmation requests from Bradmark.The contour above is an example of a positive confirmation letter that was s ent to one of their clients, United City, asking for a verification of their balance amounting to $8,627. Similar positive confirmation letter were in like manner sent to other customers with big balances to the Company. Completeness In terms of verifying whether the sales control represent those that actually occurred and were shipped during the layover, the sales bankers bill and Shipping Log records were linked. However, to control out which items were not shipped, development the comical category was necessary. Presented below is the result of this audit test.As observed, the sales last November 4, 2004 to Customer 65003 (University Electronics) was not in the record of shipped goods. This gap should be further checkd by verifying the lurch of the goods with the said customer. In addition to that, in that location were items that were shipped past the cut-off date (December 31, 2004). The ACL procedure utilise to determine this was the sift function. The get throu gh Ship_Date 20041231 was utilize and the results argon displayed below. 3 P a g e In innate, in that respect be ten records that should not be part of the Total Sales amount for the period.These records amount to a occur of $29,495. 70. aft(prenominal) taking into account the results for these two tests, the should-be balance for the Total Sales of the period was computed to be $5,317,470. 36. Valuation or Allocation The replete(p) Accounts referable balance in the records of $4,752,257. 70 was verified by setting a filter of Remit_Num = 0 and then acquiring the lend amount due. By doing this, but those sales which do not in so far imbibe a remittance advice atomic number 18 part of the accounts receivable. The figure below is the resultant role of this procedure. 4 P a g eHowever, if the difference between the total sales and the total funds accredited (for the period ending December 31, 2004) was computed, then the total Accounts due balance would be $4,578 ,008. 14. This indicates that the Accounts Receivable is misstated in the financial statements. Moreover, from the analyse tab and the function Age, an aging of the Accounts Receivable was performed. The marrow squashmary of this analysis rear be seen in this figure 5 P a g e It should be noted that based on this test, the allow for doubtful accounts should be adjusted to take a hop the actual accounts, which can be considered as uncollectible, i. . those that ar already over 90 days. The balance would then be $1,945,870. 20. 6 P a g e Compared to the current estimation method of the perimeter for Doubtful Accounts of Bradmark, this method of aging the Accounts Receivable is more appropriate. This also en certain(a)s that the balance is well-founded and properly valued. Accuracy To test the the true of the preserve cash stipends from customers, the Sales Invoice record was compared with the Cash Receipts record. These tables were joined and afterwards, the amounts due fo und in the Sales Invoice table was contrasted with those actually sure in the Cash Receipts table.The figure below registers the records that did not match and, in effect, constituted errors to the reported balances of the accounts receivable and cash receipts. thither are a total of eight records that show inconsistencies within the records of the company. Nos. 12684, 12687 and 12814 were remittances that were save by the Cash Receipts clerk but were not found in the Sales Invoice records. These may be considered as a red pivot to Bradmark. With these results, the management should verify if they have, in fact, received these fees as this may indicate thievery within the Company. otherwise records like remittance nos. 12657, 12663 and 12709 face probable human errors while recording, since these discrepancies were due to overleap or excess of digits as shown below. Lastly, remittance nos. 12651 and 12697 reveal that the amounts due have not been paid in secure. This constit utes receivables from the customers. There is a need, however, to verify this and include those with fond(p) payments in the list of customers to whom confirmation earn will be sent. 7 P a g e Other Operational Concerns (Related to Revenue Procedures)Moreover, to make sure that the credit policy is consistently utilise and that no customer exceeded his/her assigned credit limit, the join function was utilized. After connectedness the tables Customer and Sales Invoice use the many-to-many category, the filter Amount_Due Credit_Limit was subsequently set. The outcome of this test can be seen from the following figures 8 P a g e This shows that six customers (Customer Numbers 65003, 419449, 564291, 784547, 811002 and 925007) were given approval to barter for beyond their allowed credit limit.Particularly discernible are customers 65003 (university Electronics) and 925007 (Galaxy Company), who have several purchases that exceeded their permissible credit. An in-depth inquiry o n this matter should be done to uncover the cause of these violations. using up CYLCE Assessment of Internal Controls over the Expenditure Cycle After assessing its practices, Bradmarks internal controls over its expenditure cycle protrude to be inadequate. To rationalize this ? Mr. James perambulator has sole control over the ending of when to replenish the Companys gillyflower, by how much and to whom to buy.This way of restocking seems to be disorganised and subjective and by doing so, the Company is not that assured that purchases are do in an arms-length transaction. ? There may be gaps in the receiving report numbering system as the clerk must void receiving reports when errors are make during the data penetration, thitherby losing its significance as a control tool. ? hold and balance controls in place cannot be relied upon as there is a lack of segregation of duties. Mr. Walker has means to override. To illustrate, since Mr.Walker is the one encoding if the prescr ibeed products have been received in the warehouse and also the one making purchase rates, he can make a phony purchase order and indicate that it has already been received, even if no delivery has occurred. The accounts payable clerk would not detect that such(prenominal) was the content because her only verification toll 9 P a g e she has is the RR Number that has been placed in the PO record, which, in the beginning place, was also encoded by Mr. Walker. Furthermore, it is to be noted that Mr.Walker played a significant role when the system was cosmos put into place and can hence effectively administer the system. Completeness Furthermore, in order to verify that there are no un preserve liabilities during 2004, the Purchase Order and Receiving plow files were joined. Then, the resulting table was joined with the Vouchers payable file. To search for the items that were recorded, a filter is made to extract unmatched PO number in the three files. The result of this audit te st is shown in the figures below 10 P a g eThe results indicate that there are 21 incidences where a good was received (as recorded in the RR File) but no order was placed for it (based on the absence of the entry in the PO file). These received goods are also unrecorded in the Vouchers Payable file conceivably understating the Accounts Payable for the year. Moreover, the results also showed that there are 22 incidences where an order (as shown in Purchase Order file) was not received (as it cannot be found in the Receiving Report file) but was paid for by the Company (as indicated in the Vouchers Payable file).The droll thing about these incidences was that these transactions were made with the same seller (Vendor Number 11663). It is achievable that all those purchase orders were fabricated and vendor number 11663 is a fictitious supplier. 11 P a g e The summary of the actions taken is presented in this figure Valuation or Allocation The chronicle Account is currently valued at $ 1,108,194. 94 which was calculated as the note between lump sum approach and the market place value of the roll. This was verified by using the Total Fields function.The results are shown in the figure 12 P a g e However, such computation does not value the neckcloth items individually at their lower of toll or net realisable value in accordance with the accounting reporting standards. Thus, inventory is currently misstated in the financial statements. Thus, to correct the inventory balance, it is necessary to use the filter and total function. Inventory items whose costs are lower than their market value were first added. This resulted to a total of 140 items having a should-be recorded cost of $941,109. 79.Meanwhile, 11 inventory items that should be valued at their market value have a total of $129,986. 27. Adding these two figures together, the inventory balance should be at $ 1,071,096. 06. 13 P a g e Accuracy In asserting the accuracy of payments to vendors, the C heck establish and the Voucher Payable data were joined. This gives us 17 entries that show zero value. stress and total functions were used to determine if there are payments made which are great than what was actually owed by the Company. As shown in the figures below, the total disbursed cash is greater than the sum 14 P a g e f the full amount. The full amount is the basis for the disbursing of cash however, cardinal records appear to have exceeded this limit. One shows that there was a check issued to settle a payable that has a negative amount. In addition, three checks that have negative value were issued to pay three negatively recorded payables. Further examination of 15 P a g e these check payments must be made in order to ascertain if these discrepancies have resulted from continent human errors or were intentionally made to cover a fraudulent act.By peeping for duplicates, another anomaly was uncovered. One out of the 25 records shows that two consecutively numbe red checks were issued to pay for one invoice. The management must investigate on this incident as this involves an stated misuse of financial resources. 16 P a g e 17 P a g e Operational Risk This test focuses on the operational efficiency of the company. To ensure that the drop for their purchases are taken advantage of, the payment due date was compared with the actual payment date.This was done by first association the Check Register and Vouchers Payable files using the matched category. Subsequently, those checks that do not have a check number were filtered using Chk_Num . This is to make sure that only those checks that were actually issued are compared to the accounts paid. The resulting data is again filtered using Pay_Date Due_Date to bring at those purchases whose actual payment data is beyond their due date. The following tables show the files after the employing the said filter 18 P a g e 19 P a g e 20 P a g e