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4. Revenues and Accounts Receivable Credit and Collection 4.1 There is a documented credit policy which covers:1. Standard terms and conditions of payment 2. Levels of authority to vary policy terms and under what conditions terms may be altered 3. how prospective customers are assessed for credit 4. who has the authority to set and amend credit limits 5. how overdue accounts are controlled and followed up. Testing 1. Ensure that a documented credit policy exists. 2. review this to ensure that the above areas are adequately covered Results 4.2 High risk accounts are not approved unless security is provided, such as:1. Guarantees 2. Letters of credit 3. Retention of title clauses (capable of being implemented effectively). Testing 1. ascertain whether any high risk accounts exist (if no consider this answer against the aged debt profile) 2. if yes enquire what measures are taken to ensure that payment is received Results 4.3 The opening of new accounts and amendment to credit limits and credit terms are closely co-ordinated with the credit control function. Testing How is the credit control function involved in the opening of accounts and amendment of credit limits and credit terms. Results 4.4 Individual orders that would cause the total outstanding balance to exceed the credit limit are rejected and flagged for attention. To be fulfilled, they need approval by higher-level management. Testing Document the process for dealing with situations where customer credit limits are/will be exceeded Results 4.5 Reports are prepared and reviewed monthly detailing:1. Aged analysis of debtors, including significant overdue balances, accounts in dispute and claims by customers 2. Customer balances exceeding credit limits 3. Overdue customer accounts 4. Credit balances 5. Unallocated cash. Testing

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Ascertain whether monthly reports are prepared and reviewed for the above. Results Sales Invoicing and Contracts 4.6 Terms and conditions of sales including contractual terms are fully communicated to new customers. 4.7 Changes to price lists, pricing data, discounts and other contractual terms are approved by authorised personnel. Where computerised, changes are subject to strict access control. Service delivery records (eg timesheets or contracts) are matched with sales invoices and all discrepancies investigated. Sales invoices are sequentially numbered. They include the customers order number and contain the terms of sale. Testing 1. for a sample of 5 new customers (from the previous 12 months) ensure that terms and conditions have been communicated (inclusion in the contract is fine). If any exceptions are found increase the sample to 10. Record the customers sampled and results. 2. ascertain the process for amending price lists, pricing data, discounts and contractual terms. Ensure that these tasks are performed by appropriate individuals. For a sample of 5 existing customers verify when the last price increase occurred. If this was not in the previous 12 months for any of the sample then increase this to 10 (unless PIs are contractually fixed). 3. ensure that service delivery records are matched against sales invoices. Document the process for investigating discrepancies. 4. ensure that invoices are sequentially numbered and include the terms of sale. 5. test a sample of 10 invoices for agreement to the contract and work schedules/time sheets. Results Cash Receipts 4.10 All receipts are banked promptly; amounts not banked are locked in a safe. 4.11 All receipts are credited against the outstanding invoices within one week of receipt. Testing 1. Ascertain whether any cash or cheque receipts are received. If yes ensure that these are banked promptly and held in a secure location until this has occurred. 2. Verify that receipts are allocated against invoices within one week of receipt (e.g. review current bank statements and AR unallocated cash). Results Accounts Receivable 4.12 Customer statements are mailed periodically to customers and disputes and queries are investigated on a timely basis and monitored by a responsible official. 4.13 Provision is made for bad and doubtful debts in accordance with Group policy. Testing 1. Verify whether customer statements are sent. Document the process for

4.8 4.9

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handling customer queries and disputes. 2. Test the bad and doubtful debt provisions for compliance with Group policy. Results

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