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April3, 2014

Identifythe risks for each process

Salesorder entry risks

Thereare various risks associated with use of accounting computerinformation in the sales order process for ABC Technologies Ltd.These risks include inadequate stock or excess inventory when makingsales order entries, uncollectible accounts, incomplete or inaccurateorders from clients, invalid orders due to invalid credit cards andcomputer fraud where a person may falsify input process, modify thesales order software or the sales data may be stolen.


Duringthe shipping process, there are various risks ABC Technologies mightface. These include shipping wrong client’s items or wrongquantity due to wrong picking tickets. Inventory theft is anotherrisk associated with shipping if a computer fraud is perpetratedduring the sales order entry, goods may be stolen. Similarly,inventory theft may occur while on goods are in transit. Othershipping risks are delay or failure to ship, wrong address andduplication of data may occur in where clients may receive orderedgoods twice.


Theyinclude failure to bill customers, billing errors errors may occurwhere clients are not invoiced for the sales order, customers’accounts and receivable files at the bank might not be accuratelymaintained leading to wrong invoicing. In some instances customersmay be billed for goods not ordered, posting errors in accountsreceivables and inaccurate or invalid credit memos (Romney,et l, 2013).

Cashcollections Risks

Thereare various risks associated with cash collection using the computeraccounting information system late or non payment of accounts mayoccur. Normally cash collection theft and fraud occurs during receiptand recording of payments. Cash flow problems may pose threat to cashcollections where no clear account record exists and reconciliationof information from receivable officer, shipping officer and bankdetails differ. On the other hand, computer errors from initial salesorder entries may affect cash collection as data might differ. Inaddition, client credit card may become invalid before the shippingprocess.

Controlprocedures applied to reduce risks associated with Revenue cycle

SalesOrder Entry control

Tocontrol threats associated with taking customers orders, ABCTechnologies Ltd has enhanced credit approval in their computer salesentry where credit card validity is confirmed before completing theorder. This is an important control aspect to risks associated withprocessing customer orders without sufficient credit. In addition,the accounting information system has sales order credit limit wherethe computer approves sales to new customers within customers creditlimits. At 11pm every evening the computer extracts details of theday’s sales and updates the inventory levels, this is perpetualinventory control system which is done each day helps checkavailability and quantity of stock to avoid risks associated withcustomers making orders on goods out of stock.

Thisregular update also safeguards inventory in store against theftrisks. Further to this, ABC Technologies Ltd sales entry computerprints bar codes which are important security aspect of trackinginventory ordered and inventory in warehouse. There is an establishedsystematic automated data in the sales order entries and in thewarehouse which prevents risks associated with fraud, master datamanipulation or loss (Romney,et l, 2013).

Shippingrisks Control at ABC Technologies

Toavoid picking and shipping wrong items or quantity the warehouseofficer collects the picking tickets from the warehouse printer andpicks required goods from the shelf. To avoid shipping the wrongquantity, if part of the goods is not available, the warehouseofficer puts back the goods they have already picked for the orderand places the picking ticket in a folder on their desk labeled“awaiting goods” this helps to avoid shipping error riskassociated with sending wrong goods or quantities.

Inaddition, at the shipping department, the officer scans both thesales order and the picking ticket which is an important control riskto avoid sending goods to the wrong person and safeguard againstfraud risk which may lead to inventory theft. For instance, If thename on the order matches a name on the credit card status report,the goods and the picking ticket are sent back to the warehouse witha note attached indicating they cannot be shipped due to non-payment.These helps to limit risks associated with cash collection due toinvalid credit card.

Byupdating computer sales order data and inventory data helps inreconciling data which is important to in tracking theft, fraud andstock out risks. Delivery slips attached to the goods acts asevidence of goods delivery to customer and as such act as futurereference document in case of client complaints.

BillingRisks controls

Toensure that customers order are valid and invoiced the accountinginformation system at ABC Technologies has electronic creditverification and electronic reports which helps to verify creditorder validity. This is an important aspect in reducing risksassociated with billing errors or posting errors in accountreceivable when the client credit is invalid. There is separation ofduties at billing department, The accounts receivable officer takesthe the report with invalid credit card customers to the shippingofficer who is responsible for checking that these customers do notreceive any goods. This helps to avoid risks associated with cashcollection.

Cashcollection Risks control measures.

Thereis regular reconciliation of bank account with recorded amounts Theaccounts receivable officer receives an email from the bank advisingthem of the total amount of the funds transferred. The accountsreceivable officer then compares the total in the email to the totalin the credit card status report. If they do not reconcile the cashinput in the computer and cash receipt in the data store, the problemis referred to account receivable manager. This is critical toprevent fraud heist and cash flow problems in journals.

Changesnecessary at ABC Technologies to reduce risk in the Revenue Cycle

Onlinesales require constant changes to seal loopholes that may contributeto fraud in revenue cycle and improve sales outputs. These changesneed to target sealing access to master data in the accountinginformation system, recording data accurately, avoiding loss ofmaster data, encryption, having backup recovery procedures andputting in place effective management.

Changesneeded in the Sales Order Entry

Inthe sales order entries, specific changes should be done to havedigital signature installed in the AIS. This will ensure that onlyauthorized personnel certifies sales order entry in the systemthrough digital signature to avoid changes by others. This changewould also enhance customers certify their orders through digitalsignatures. In addition, only authorized personnel should overseemaster data processing, install safeguards to access master data andhave back up data that can be used to verify any unauthorized changesin the original transaction.

Implementstaff code of conduct, train employees on how to detect fraud risksassociated with wrong order entries, screen new employees and haveindependent institution to carry out sales order entryinvestigations. Allow independent entities do periodic checks on theinventory stocks. A CRM system should be installed in the website tohelp validate customers (Romney,et l, 2013).

Changesneeded in shipping process

Thewarehouse and shipping department should have regulations requiringreconciliation of picking lists and sale orders be done by thewarehouse officer before taking the list to the shipping officer toavoid sending wrong goods or quantities. In addition there should bean independent check of goods in the picking tickets and shippingdocuments. Restriction to physical access to the inventory is alsocritical as well as having periodic physical counts of inventory.Furthermore, regulations should be made to clients requestingdelivery signatures receipts. Lastly configuration of the EPR systemshould be done to avoid duplication of shipment.

Changesneeded in the Billing process

Toavoid risks associated with billing, ABC needs to separate billingfunction from shipping. The receivable officer should be the oneauthorizing the shipping officer on which clients goods are to bedelivered unlike the present case at ABC Technologies Ltd. Inaddition, change should be applied to introduce periodicreconciliation of invoices with sales orders, picking tickets andshipping documents to assess discrepancies. Furthermore,pre-numbering shipping documents and reviewing any shipping documentsnot invoiced is important in controlling billing errors (Romney,et l, 2013).

Cashcollection changes at ABC Technologies Ltd.

Oneimportant change that needs to be effected is separating cashhandling function from accounts receivable and credit functions.There should be two independent persons to compare amount transferredfrom credit orders to the company’s bank, this helps avoid fraud orcash flow problem that arises at this stage of revenue cycle. EFTshould be installed to minimize handling of customer payments byemployees and installing an independent person to reconcile bankaccounts with recorded cash collection amounts. All these changeswill reduce risk associated with cash theft through fraud,falsification of computer data. Other necessary change is issuingregular customer statements.


UsingAccounting Information system in making online transactions needsastute management at different stages of revenue cycle. It isimperative that organizations put in place necessary mechanisms toenhance effective process right from sales order, shipping, billingand cash collection. Common threats associated with using AccountingInformation system are software errors, unintentional acts,intentional acts (computer crimes) and natural disasters.

However,for general revenue cycle there are myriad of risks associated withthese processes. During sales order entry, certain risks may arisestock may be out, customers invalid orders, incomplete or inaccurateorders and uncollectible clients accounts. These risks can bemitigated through having data entry controls, restriction of accessto master data, having credit limits to which clients can limit theirorders, carrying out perpetual inventory controls and entering datain timely manner among others.

Shippingprocess may be occasioned with such threats as picking wrong itemsor quantity and sending it to clients, theft of inventory while inthe warehouse or during transit and shipping errors. Such risks maybe controlled through reconciling shipping documents with salesorders, reconciliation of picking lists with sales order details,restricting physical access in the inventory store among others.Billing risks include failure to bill clients, billing errors,billing goods when no goods have been shipped and inaccurate orinvalid credit memos. To correct these risks, organizations need toseparate billing and shipping functions, periodic reconciliation ofinvoices with sales orders, picking orders, picking tickets andshipping documents among other measures.

Inthe process of cash collection, risks such as, cash theft, cash flowproblems, late or non payment of goods and incorrect recording ofcustomer accounts can be prevented through separating cash handlingfunctions from accounts receivables and credit functions, using EFTto minimize handling of customer payment by employees, regularreconciliation of bank accounts by independent persons and regularfollow ups on due accounts among other methods. However, implementingcode of conduct for employees, screening of new employee beforeemployment and having a fraud policy can greatly reduce risksassociated with Accounting Information Systems(Romney,et l, 2013).


Romney,M. B., Steinberg, P.J., Mula, J. M., McNamara, R., &amp Tonkin, T. (2013).‘Accountinginformation systems’,Australia:Pearson Custom Books, Print.