Risk assessment checklist - Revenue cycle

Check Yes or No or N/A (where not applicable). Where a No is indicated, some action may be required
to rectify the situation. Cross-references (e.g., See FN 1.01) point to the relevant policy in the First Reference
Internal Control Library. FN = Finance & Accounting PolicyPro, Volume 1; GV = Finance & Accounting Policy-
Pro, Volume 2; OP = OMPP policies in FAPP electronic version; IT = Information Technology PolicyPro; NP =
Not-for-Profit PolicyPro.
Clear entire form

Revenue Cycle risks to consider Yes No N/A Comments / Action Required

Rev1 Are employees engaged in sales, handling cash
and managing receivables competent for their
assigned tasks, adequately trained and super-
vised? See OP 4.06, 6.06
Rev2 Are sales terms and policies regularly commu-
nicated to staff? See FN 1.01, 1.02, 1.03, 1.04,
1.07; OP 6.06
Rev3 Are there controls built into point-of-sale pro-
cesses to reduce risk of loss due to fraud, theft
or accounting error? See FN 1.01
Rev4 Are customers informed (with store signs,
etc.) that they should obtain receipts for every
sale? See FN 1.01
Rev5 Are cash register sales totals reconciled to
sales and cash receipts totals? Is approval
documented? See FN 1.01
Rev6 Is the sales journal/subledger reconciled to the
G/L? See FN 1.01
Rev7 Are customer orders handled efficiently and
accurately? See FN 1.02
Rev8 Do you use current pricing and inventory
information? See FN 1.02
Rev9 Do controls exist to prevent unauthorized
changes to standard price lists and customer
master files? See IT
Rev10 Do you perform an independent matching of
daily deposit totals to cash receipt records? See
FN 1.02, 5.02
Rev11 Do you use a standard price list for invoice
preparation, and require documentation and
approval for exceptions? See FN1.02

Risk assessment tools for effective internal controls - a Compliance and Best Practices Guide from First Reference Inc.
2008-2010 First Reference Inc. All Rights Reserved. 1
 Risk assessment checklist - Revenue cycle

Revenue Cycle risks to consider Yes No N/A Comments / Action Required

Rev12 Does your system track order forms and do
you follow up on those not processed in a rea-
sonable time frame? See FN 1.01, 1.02
Rev13 Do you verify customer order information
with appropriate sales and marketing person-
nel and contact customer if needed? See FN
1.02, 1.03
Rev14 Is a credit limit established for each customer?
Do you ensure that no goods are shipped or
services provided that exceed the limit with-
out management approval? See FN 1.02, 1.04
Rev15 Do your credit information systems provide
accurate approved credit limits, current bal-
ances due, age of receivables and other impor-
tant information? See FN 1.01, 1.02, 1.03, 1.04
Rev16 Do you review shipping documents for com-
pleteness and compare to customer order for
accuracy before shipment? See FN 1.02, 3.03
Rev17 Does your system track shipping documents
and do you investigate missing documents?
See FN 1.02
Rev18 Do you use standard shipping and contract
terms and communicate non-standard terms
to accounts receivable? See FN 1.02, 1.03
Rev19 Do you match orders, shipping documents,
invoices and customer information and inves-
tigate missing or inconsistent information?
See FN 1.02, 1.03
Rev20 Do you have procedures/system checks to
prevent the same invoice being issued twice?
See FN 1.02
Rev21 Do non-routine sales (e.g., sales of scrap, sales
to employees) require supporting documenta-
tion and approval? See FN 1.02
Rev22 Do you produce a monthly report on pricing
exceptions and non-routine sales? Is it re-
viewed by management? See FN 1.02
Rev23 Do you use written sales contracts? Do they
clearly identify the terms and conditions of
the sale? See FN 1.03

Risk assessment tools for effective internal controls - a Compliance and Best Practices Guide from First Reference Inc.
2008-2010 First Reference Inc. All Rights Reserved. 2
 Risk assessment checklist - Revenue cycle

Revenue Cycle risks to consider Yes No N/A Comments / Action Required

Rev24 Do you have clear, well-understood and en-
forced credit policies? See FN 1.04
Rev25 Is the customer credit limit reviewed on a
regular basis and changes made as required?
See FN 1.04
Rev26 Is credit approval independent of the sales and
accounts receivable functions? See FN 1.04
Rev27 Are your sales commission policies clear and
equitable? See FN 1.05
Rev28 Do you have clear, well-documented warranty
and guarantee policies? Are they understood
by the staff who administer them? See FN
1.06.
Rev29 Do you have consistent customer refund poli-
cies, and are they followed by staff? See FN
1.07.
Rev30 Do you monitor customer returns or billing
disputes relating to products delivered but not
ordered? See FN 1.07
Rev31 Do you authorize credit memos using indi-
viduals independent of the accounts receivable
function? See FN 1.07
Rev32 Does your system track credit memos and do
personnel independent of the accounts re-
ceivable function match them with receiving
documents? See FN 1.07
Rev33 Do you monitor and follow up on accounts
receivable consistently? Do you have a policy
that outlines the process? See FN 1.08.
Rev34 Do collection staff take timely action on over-
due accounts? See FN 1.08
Rev35 Do you ensure that the preparation and mail-
ing of statements is not done by the receiv-
ables clerk? See FN 1.08
Rev36 Do you mail customer statements periodically,
and resolve disputes using personnel indepen-
dent of the invoicing function? See FN 1.08

Risk assessment tools for effective internal controls - a Compliance and Best Practices Guide from First Reference Inc.
2008-2010 First Reference Inc. All Rights Reserved. 3
 Risk assessment checklist - Revenue cycle

Revenue Cycle risks to consider Yes No N/A Comments / Action Required

Rev37 Do you monitor the number of customer
complaints regarding improper statements or
invoices? See FN 1.08
Rev38 Do you review correspondence authorizing
returns and allowances? See FN 1.08, 7.05
Rev39 Do you have written policies and procedures
governing the recognition of revenue for ac-
counting purposes? See FN 1.09
Rev40 Are revenue recognition policies clearly
communicated to accounting and operations
personnel? See FN 1.09
Rev41 Do procedures exist to ensure revenue is
recorded in the appropriate accounting period
(cut-off)? See FN 7.05
Rev42 Do you reconcile the accounts receivable
subsidiary ledger with sale and cash receipts
transactions? See FN 1.09, 7.05
Rev43 Do you have strong, well-documented con-
trols governing pricing and discounting? See
FN 1.10
Rev44 Do you have documented procedures for cal-
culating, collecting, and remitting sales taxes?
See FN 1.11
Rev45 Do you provide timely and accurate informa-
tion needed by management and others to
discharge their responsibilities? See FN 1.12,
2.12, 2.14, 3.05, 3.06, 7.01, 7.02, 7.03
Rev46 Do you prepare financial reports on a timely
basis and in compliance with applicable laws,
regulations, rules or contractual agreements?
See FN 1.12, 2.12, 2.14
Rev47 Do you ensure completeness and accuracy of
accounts receivable? See FN 1.12
Rev48 Do you regularly produce a sales report show-
ing sales by customer, product line, region, di-
vision, etc., including comparisons to budget
and/or prior periods? See FN 1.12

Risk assessment tools for effective internal controls - a Compliance and Best Practices Guide from First Reference Inc.
2008-2010 First Reference Inc. All Rights Reserved. 4
 Risk assessment checklist - Revenue cycle

Revenue Cycle risks to consider Yes No N/A Comments / Action Required

Rev49 Do you regularly produce a report showing

sales returns and allowances? Does manage-
ment investigate unusual variances? See FN
1.07, 1.12; GV 6.02
Rev50 Do you regularly produce a report analyz-
ing sales, cost of sales and gross profit against
budget and/or prior periods? See FN 1.12
Rev51 Does management regularly (at least monthly)
compare budgeted sales to actual sales and
investigate variances? See FN 1.12, 7.02
Rev52 Does management regularly (at least monthly)
review gross profit ratios and sales trends and
document reasons for variances? See FN 1.12,
7.02
Rev53 Does management regularly review period
end/major transactions to ensure revenue rec-
ognition policies are being followed? See FN
1.09, 1.12, 7.02
Rev54 Does management regularly (at least monthly)
review pricing exception reports and follow
up when needed? See FN 1.02
Rev55 Does management regularly (at least monthly)
review a reconciliation of aged receivables to
control accounts? See FN 1.12
Rev56 Does management investigate significant
overdue customer accounts and follow up as
necessary? See FN 1.08

Risk assessment tools for effective internal controls - a Compliance and Best Practices Guide from First Reference Inc.
2008-2010 First Reference Inc. All Rights Reserved. 5