64 Control Matrix for the Cash Receipts Process IS 630 : Lecture 664

65 Validity for the Cash Receipts Process Valid RA inputs (i.e., cash receipts) are those that
represent funds actually received and for which cash discounts have been authorized and approved.
If a cash receipts process is completed without actual funds, assets will be misstated (AR too low
and cash too high). IS 630 : Lecture 665

66 Key Cash Receipts Controls Immediately endorse incoming checks : to protect payments from
being fraudulently misappropriated, checks should be restrictively endorsed as soon as possible
following their receipt in the organization. Immediately separate checks and remittance advices:
RAs should be immediately separated from the checks to accelerate deposits and reduce
opportunities to divert cash and undertake lapping. IS 630 : Lecture 666

67 Key Cash Receipts Controls... Lockbox : payments are sent directly to a third-party lockbox
service for more secure, timely, efficient, and accurate processing. Turnaround documents : the
remittance advice is the stub from a statement or invoice and can processed more efficiently and
accurately. IS 630 : Lecture 667

68 Key Cash Receipts Controls... Reconcile bank account regularly: reconcile bank statement to
the cash receipts event data to ensure that all valid deposits were recorded correctly. Should be
performed by someone other than those that handle cash receipts and disbursements. Monitor
open accounts receivable: regularly review and follow-up on accounts receivable aging reports to
ensure that payments are received in a timely manner. IS 630 : Lecture 668

69 The Fraud Connection B/AR/CR process provides opportunity to manipulate final results such
as revenue and AR by violating GAAP revenue recognition rules. Improper segregation of duties
between handling cash and recording cash transactions can result in misappropriating cash:
Lapping: fraud by which funds being paid by one customer are stolen, and the theft is covered up by
applying funds from another customer to the first customers account. Rotation of duties and forced
vacations help prevent this type of fraud. IS 630 : Lecture 669

70 Electronic Bill Presentment and Payment (EBPP) Electronic Bill Presentment and Payment
(EBPP) systems: B2C systems that use a Web site to post customers bills and to receive their
electronic payments. Types of EBPP systems: Biller direct method, whereby a company posts its
bills/invoices to its own Web site (or to a Web site hosted for it by a third party).
Consolidation/aggregation method, in which bills are not posted to the billing companys Web site but
are posted to a Web site hosted by the billing companys own bank or by a company such as Fiserv.
IS 630 : Lecture 670

71 Accelerating Cash Receipts Electronic funds transfer (EFT): general term used to describe a
variety of procedures for transmitting cash funds between entities via electronic transmission instead

of using paper checks. Includes wire transfers, credit and debit card processing, as well as payments
made via the ACH Network. Automated Clearing House (ACH) Network: b atch processing system
for the interbank clearing of electronic payments. IS 630 : Lecture 671

72 Accelerating Cash Receipts... Lockbox: postal address maintained by a third partytypically a

bankwhich is used solely for the purpose of collecting checks. Remote deposit capture uses
scanners to capture check images and to use those images, instead of the paper check, to make a
deposit to a checking, savings, or money market account. IS 630 : Lecture 672