Fraud and production cycles

Assignment Help Accounting Basics

Reference no: EM1363756 , Length: 2 Pages

Briefly discuss:

1. What are several conditions that can lead to fraud and to what type of fraud can they lead?

2. Describe the source documents and controls that would be included in a typical production cycle.

Management is responsible for the establishment of the controls over the sales-receivables-cash cycle to ensure:

- Proper acceptance of the customer order

- Granting of credit approval in accordance with credit limits

- Safeguarding of assets associated with the sale

- Timely shipment of goods to customers

- Billing for shipments at authorized prices

- Accounting for and collection of receivables

- The recording, safeguarding, and depositing intact of cash/checks received.

Sales orders from customers should be accepted only in accordance with management's authorized criteria.

The credit department should give credit approval in accordance with management's credit policies and authorized credit limits for each customer.

Company policies should prohibit the release of any goods from the warehouse without authorization.

Discuss several management controls that may help ensure that all sales transactions are properly recorded.

Reference no: EM1363756

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