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UNIQUE OFFERS WORLD LTD You are in the assurance team of BEST-CPA, a Certified Public Accounting firm. BEST-CPA has been engaged to provide consultancy with respect to accounting processes and internal controls of Unique Offers World Ltd [UOW] a retail store selling consumer goods. Upon completion, your team recommended to Mr. ZHAO, UOW's Chief Accountant, the Order-to- Cash and Procure-to-Pay processes as depicted in System Flowcharts 1 to 5 (pages 9 to 13). These recommended processes have been implemented. Recently a post-implementation was carried out. Revenue Cycle System Flowchart 1 Sales Billing Customer Customer's Purchase Order Check Stock Prepane Order Customer Order Fil Stack (Picking Slip) SO 3 File copy SO 3 Packing SO4 Inv sub ledger SO 4 File copy Notice SO 5 Ledger SO 5 File.co.p SO 5 Invoice SO 2 copy SO 2 Credit copy Credit Sales Journal Credit Chack Credit copy SO 5 Kile copy Shipping Notice SO Invoice SO Ladgar Mcconcis & Bill Customer Tax Freight SO 5 Kay Journal SO 3 Stock Mocass (Picking Slip) IC Sales Customer VBOL SO 5 Invoice ARA SO 3 stk N (Picking Sle) SO 4 Note Journal Voucher AR SO 5 Ledger AR 1? Prepared by Julian Liew, Adapted: Hall Warehouse SO 3 Kile copy SO 3 Stack Meleme (Picking lig Goods SO 3 F4 Copy Stock Record Stack SO 3 Stock R (Picking Slip) Melem/73 S04 Shipping Notice Shipping SO 4 File copy S04 Packing Notice Reconcila, and Ship SO 4 File copy F Shipping Log BOL 1 BOL2 Bill of Lading 3 SO 4 Packing Carrier Revenue Cycle System Flowchart 2 Billing Inventory Control AR SO 5 Ledger IC SO 3 Stock Release (Picking Slip GL Journal Voucher Prepared by Julian Liew, Adapted: Hall SO 3 Stock Release (Picking Slip) Update Inventory SO 3 Stock Release (Picking Slip) F Inventory Sub Ledger Purchase Requisitions Order to Pay 2 ? Journal Voucher Accounts Receivable SO 5 Ledger Update AR Sub ledger SO 5 Ledger F AR Sub Ledger AR Summary General Ledger AR Summary Journal Voucher Journal Voucher AR Summary Journal Voucher Journal Voucher Update GL General Ledger Cash Receipts System Flowchart 3 Cash Receipts/Cashier / Treasurer Mail Room Customer Cheque Remittance Advice Reconcil cheque with RA, Prepare RL Remittand List - 1 AR Remittance List -2 Cheque Recept Bank Remittance List -3 Remittance Advice Cheque Remittance List - 1 Process Cash Rec Deposit Slip-1 Deposit Slip-2 Deposit Slip-3 Cheque Remittance List - 1 CR Journal Journal Voucher Bank 3? Account Receivable Remittance List -2 Remittance Advice Process Cash Rec Remittance List-2 Remittance Advice AR Sub Ledger AR Summary Prepared by Julian Liew, Adapted: Hall General Ledger AR Summary Journal Voucher Recept Bank Update GL Journal Voucher AR Summary F General Journal Controller Deposit Slip-2 Remittance List -3 Recept Bank Journal Voucher AR Summary Bank Bank Stm Bank Reconciliation Deposit Slip, AR Summary, Remittance L Expenditure Cycle System Flowchart 4 Purchase Inventory Control claed PO PO5 Purchase Vendar Requisition 1 Prepare PO PO4 PO 3 PO 2 Purchase Order PO 1 Purchase Order Purchase Requisition 1 Receiving Report Close PO Receiving Report Order to Cash Punda Requie Open PR file Conversion RFP/ RFQ Prepara PR Purchase Requisition 1 Purchase Requisition 2 Receiving Report Summary Various department Vendor Vendor Master Receiving Report Update Inventary Inventory Sub Ledger PO4 Blind Copy Receiving 1 Ware- house Stack Records Receiving Prepare RR Vendor Packing Slip Receiving 3 Receiving Report Prepared by Julian Liew, Adapted: Hall QA PO4 RR Packing Slip PO3 Purchase Order Receiving Raport Update AP Journal Voucher Update GL AP/GL 4? Vendor Non-PO Invoice PO Invoice Purchase Journal Receiving Report PO 3 Purchase AP Packet General Journal Open Invoice file Sub Ledger PO Invoice Open AP file Journal Voucher Summary Cash Disbursement System Flowchart 5 Accounts Payable Open AP file Open Invoice file Invoice Invoice AP Sub ledger Invoice Invoice file AP Packet AD AP Review AP Packet cket Receiving Report 4 PO3 Purchase Order Update AP AP Packet Copy 2 Cheque AP file Invoice Summary AP Packet Invoice Invoice Cash Disbursements / Cashier AD AP Packet Invoice AP Packet Capy 2 Cheque Prepare Cheque Capy 1 Copy 2 Cheque Sign Cheque Cheque Vendor CP Journal Journal Voucher Cheque Register Copy 1 Cheque Prepared by Julian Liew, Adapted: Hall 5? General Ledger Summary Journal Voucher Reconcile & Post Summary Journal Voucher General Ledger Recently the trial balance did not balance and a suspense account was created. ZHAO using skills learned in a financial accounting course found that sales (in the General Ledger) were often overstated whilst AR sub-ledger being accurate. Based on the flowcharts, you are asked to investigate a. what could have happened for this error to arise b. in which department could this possibly have happened? (8 marks) (2 marks) Eric and Xindi, two accountants who were in charge of the Inventory Control, have been posted to UOW's Sydney office. ZHAO wishes to save costs and plans to close down the Inventory Department and transfer the remaining staff Xuanxuan, a qualified accountant, to become Warehouse Manager and she should update the Inventory Ledger from there. Please refer to Flowchart 1, 2 and 4. REQUIRED Is this arrangement acceptable? Explain. (10 marks) ZHAO does not want his staff to do the "summary" as shown in the recommended flowcharts because he thinks it is a waste of time. REQUIRED What is the purpose of these "summary"? (5 marks) b. In this case, how would you ensure the control accounts in the General Ledger are still correct? Explain your answer by using just ONLY ONE of the summaries (10 marks) In the recommended accounting policies, the revenue is formally recognised at a point of time when invoices are issued by the Billing (Flowchart 1) Department. REQUIRED a. Can revenue be recognised by another department other than UOW's Billing Department? Explain (5 marks) b. If it could be, IDENTIFY and EXPLAIN which department that is, without quoting any provisions from HKFRS15. (5 marks) UNIQUE OFFERS WORLD LTD You are in the assurance team of BEST-CPA, a Certified Public Accounting firm. BEST-CPA has been engaged to provide consultancy with respect to accounting processes and internal controls of Unique Offers World Ltd [UOW] a retail store selling consumer goods. Upon completion, your team recommended to Mr. ZHAO, UOW's Chief Accountant, the Order-to- Cash and Procure-to-Pay processes as depicted in System Flowcharts 1 to 5 (pages 9 to 13). These recommended processes have been implemented. Recently a post-implementation was carried out. Revenue Cycle System Flowchart 1 Sales Billing Customer Customer's Purchase Order Check Stock Prepane Order Customer Order Fil Stack (Picking Slip) SO 3 File copy SO 3 Packing SO4 Inv sub ledger SO 4 File copy Notice SO 5 Ledger SO 5 File.co.p SO 5 Invoice SO 2 copy SO 2 Credit copy Credit Sales Journal Credit Chack Credit copy SO 5 Kile copy Shipping Notice SO Invoice SO Ladgar Mcconcis & Bill Customer Tax Freight SO 5 Kay Journal SO 3 Stock Mocass (Picking Slip) IC Sales Customer VBOL SO 5 Invoice ARA SO 3 stk N (Picking Sle) SO 4 Note Journal Voucher AR SO 5 Ledger AR 1? Prepared by Julian Liew, Adapted: Hall Warehouse SO 3 Kile copy SO 3 Stack Meleme (Picking lig Goods SO 3 F4 Copy Stock Record Stack SO 3 Stock R (Picking Slip) Melem/73 S04 Shipping Notice Shipping SO 4 File copy S04 Packing Notice Reconcila, and Ship SO 4 File copy F Shipping Log BOL 1 BOL2 Bill of Lading 3 SO 4 Packing Carrier Revenue Cycle System Flowchart 2 Billing Inventory Control AR SO 5 Ledger IC SO 3 Stock Release (Picking Slip GL Journal Voucher Prepared by Julian Liew, Adapted: Hall SO 3 Stock Release (Picking Slip) Update Inventory SO 3 Stock Release (Picking Slip) F Inventory Sub Ledger Purchase Requisitions Order to Pay 2 ? Journal Voucher Accounts Receivable SO 5 Ledger Update AR Sub ledger SO 5 Ledger F AR Sub Ledger AR Summary General Ledger AR Summary Journal Voucher Journal Voucher AR Summary Journal Voucher Journal Voucher Update GL General Ledger Cash Receipts System Flowchart 3 Cash Receipts/Cashier / Treasurer Mail Room Customer Cheque Remittance Advice Reconcil cheque with RA, Prepare RL Remittand List - 1 AR Remittance List -2 Cheque Recept Bank Remittance List -3 Remittance Advice Cheque Remittance List - 1 Process Cash Rec Deposit Slip-1 Deposit Slip-2 Deposit Slip-3 Cheque Remittance List - 1 CR Journal Journal Voucher Bank 3? Account Receivable Remittance List -2 Remittance Advice Process Cash Rec Remittance List-2 Remittance Advice AR Sub Ledger AR Summary Prepared by Julian Liew, Adapted: Hall General Ledger AR Summary Journal Voucher Recept Bank Update GL Journal Voucher AR Summary F General Journal Controller Deposit Slip-2 Remittance List -3 Recept Bank Journal Voucher AR Summary Bank Bank Stm Bank Reconciliation Deposit Slip, AR Summary, Remittance L Expenditure Cycle System Flowchart 4 Purchase Inventory Control claed PO PO5 Purchase Vendar Requisition 1 Prepare PO PO4 PO 3 PO 2 Purchase Order PO 1 Purchase Order Purchase Requisition 1 Receiving Report Close PO Receiving Report Order to Cash Punda Requie Open PR file Conversion RFP/ RFQ Prepara PR Purchase Requisition 1 Purchase Requisition 2 Receiving Report Summary Various department Vendor Vendor Master Receiving Report Update Inventary Inventory Sub Ledger PO4 Blind Copy Receiving 1 Ware- house Stack Records Receiving Prepare RR Vendor Packing Slip Receiving 3 Receiving Report Prepared by Julian Liew, Adapted: Hall QA PO4 RR Packing Slip PO3 Purchase Order Receiving Raport Update AP Journal Voucher Update GL AP/GL 4? Vendor Non-PO Invoice PO Invoice Purchase Journal Receiving Report PO 3 Purchase AP Packet General Journal Open Invoice file Sub Ledger PO Invoice Open AP file Journal Voucher Summary Cash Disbursement System Flowchart 5 Accounts Payable Open AP file Open Invoice file Invoice Invoice AP Sub ledger Invoice Invoice file AP Packet AD AP Review AP Packet cket Receiving Report 4 PO3 Purchase Order Update AP AP Packet Copy 2 Cheque AP file Invoice Summary AP Packet Invoice Invoice Cash Disbursements / Cashier AD AP Packet Invoice AP Packet Capy 2 Cheque Prepare Cheque Capy 1 Copy 2 Cheque Sign Cheque Cheque Vendor CP Journal Journal Voucher Cheque Register Copy 1 Cheque Prepared by Julian Liew, Adapted: Hall 5? General Ledger Summary Journal Voucher Reconcile & Post Summary Journal Voucher General Ledger Recently the trial balance did not balance and a suspense account was created. ZHAO using skills learned in a financial accounting course found that sales (in the General Ledger) were often overstated whilst AR sub-ledger being accurate. Based on the flowcharts, you are asked to investigate a. what could have happened for this error to arise b. in which department could this possibly have happened? (8 marks) (2 marks) Eric and Xindi, two accountants who were in charge of the Inventory Control, have been posted to UOW's Sydney office. ZHAO wishes to save costs and plans to close down the Inventory Department and transfer the remaining staff Xuanxuan, a qualified accountant, to become Warehouse Manager and she should update the Inventory Ledger from there. Please refer to Flowchart 1, 2 and 4. REQUIRED Is this arrangement acceptable? Explain. (10 marks) ZHAO does not want his staff to do the "summary" as shown in the recommended flowcharts because he thinks it is a waste of time. REQUIRED What is the purpose of these "summary"? (5 marks) b. In this case, how would you ensure the control accounts in the General Ledger are still correct? Explain your answer by using just ONLY ONE of the summaries (10 marks) In the recommended accounting policies, the revenue is formally recognised at a point of time when invoices are issued by the Billing (Flowchart 1) Department. REQUIRED a. Can revenue be recognised by another department other than UOW's Billing Department? Explain (5 marks) b. If it could be, IDENTIFY and EXPLAIN which department that is, without quoting any provisions from HKFRS15. (5 marks)

Answer rating: 100% (QA)

Requirement a Recently the trial balance did not balance and a suspense account was created ZHAO using skills learned in a financial accounting course found that sales in the General Ledger were often ... View the full answer