AA – L2 – SA – Q3.6 – Revenue System Deficiencies

Consequences of revenue system shortcomings.

Question

The following shortcomings have been identified in Apex Ltd’s revenue system. For each deficiency select the most likely consequence.
Invoices are not checked for arithmetic accuracy before being issued to customers
A Company may process loss-making sales orders
B Cash receipts are not recorded correctly in the cashbook
C Increased risk of client dissatisfaction
Sales discounts are not authorized prior to being given
D Company may process loss-making sales orders
E Cash receipts are not recorded correctly in the cashbook
F Increased risk of client dissatisfaction

Answer

C, D

Explanation:

Unchecked invoice accuracy (C) risks errors, leading to client dissatisfaction due to incorrect billing. It doesn’t directly cause loss-making orders (A) or cash recording issues (B).
Unauthorized discounts (D) may reduce revenue, leading to loss-making orders. It’s less likely to affect cash recording (E) or directly cause dissatisfaction (F). Thus, C and D are correct.