likely delivery date and potential back order
Obtain credit approval
- risk of not being paid: dissatisfaction, financial distress; credit risk mitigated byevaluation of credit worthiness and update the credit worthiness.
Shipping and packing documents-
picking tickets: sequence in which to pick items for shipment and thelocation of all item to be shipped.
Bill of lading:
is a formal legal document that conveys responsibility to the shipper. The shippingdepartment confirms the shipment by: (1) completing the packing slip and returning it to the billingdepartment (2) electronically recording everything shipped and transmitting it to the billing department(3) preparing independent shipping documents
invoices are normally prepared when notice is received that good were shipped.
monthly statements provide a detailed list
of the customer’s activity for the
previous month and a statement of all open items.
: Completeness and accuracy of cash receiptInherent risk- sales: Must understand the following1.
What is the client’s business?
Earning process and the nature of the obligation3.
The right of the customer to return a product.4.
Complex transaction with unual rights of return.5.
Combination of leases and sales.Inherent risk- accounts receivables: net amount shown is not collectible either because the receivablesrecorded do not represent bona fide claims or there is an insufficient allowance for uncollectibleaccounts.1.
Sales of receivables made with recourse and recorded as sales transactionsthan financing transactions2.
Receivables pledged as collateral against specific loans with restricted use3.
Receivables incorrectly classified as current when likelihood of collectionduring the next year is low.4.
Collection of receivable contingent on specific events currently cannot beestimated.5.
Payment is not required until the purchaser sells the product to its endcustomer.The preliminary analysis does not identify any unexpected relationships and does not identify anyadditional risk.