Telecommunications Billings and Accounts Receivable
OBJECTIVES
To evaluate the adequacy of controls over telecommunications billing
and accounts receivable functions (i.e., to ensure that all income
transactions are promptly recorded).
FIELDWORK PREPARATION
- Discuss all program steps, ICQ questions, and work paper format
with the Director to determine applicability to the area to be
audited. Obtain Director's approval of the Audit Program.
- Extract data from the department's FRS general ledger for
the period under review. Determine the amount of outstanding accounts
receivable recorded.
REVENUE CYCLE CONTROLS
- Complete the Billing and Accounts Receivable ICQ.
- Gain a thorough understanding of the department's revenue
cycle. Determine controls designed to ensure: sales are billed
accurately and promptly, sales and accounts receivable are recorded
accurately, and outstanding receivables are monitored and collected.
Prepare flowcharts which include:
- types of accounts;
- determination of fees and charges;
- discounts to customers and employees;
- credit investigation procedures;
- billing procedures;
- recognition or non-recognition of accounts receivable on FRS;
- collection procedures; aging of accounts receivable;
- bad debt policies and procedures;
- other pertinent facts, policies, procedures.
- Determine if the proper controls are present for manual charges
and credit transactions.
- Verify that there are current written procedures for the revenue
cycle.
- Determine if there is separation of the billing and accounts
receivable duties.
BILLING
- If pre-numbered workorder forms are used, examine the department's
records to insure the department controlled the numerical sequence.
- Test a sample of workorders for the following attributes:
- goods/services provided match goods/services billed;
- charges to FRS accounts are approved;
- footings and extensions are correct;
- invoices are properly recorded in customer accounts on FRS
and BRS;
- appropriate rates were applied;
- other tests as necessary to evaluate whether all transactions
are properly authorized, billed and recorded
NOTE: Provide documentation for at least
one account in the work papers as an example. Also, record details
of any discrepancies.
- Determine that credits issued were properly documented and
authorized.
- Test samples of long distant carrier charges from MCI, AT&T,
US West, and other carriers to determine if the billing statements
contain any erroneous charges to Telecommunications.
ACCOUNTS RECEIVABLE
- Obtain (or prepare) an aging of accounts receivable as of
the audit date (or a listing of outstanding accounts if an aging
is not feasible) to determine if department is effectively collecting
outstanding accounts.
- Select a sample of accounts for confirmation and send confirmations
(with department's invoices if possible). Consider positive and/or
negative confirmations. Send positive confirmations on administrative
billings and negative confirmations on BRS billing.
- Determine if there are controls to ensure that all customers
are billed. Review the reconciliation procedures of the long distant
carriers to Telecommunications' management system. Determine if
controls exist to insure that Telecommunications is rebilling
carrier charges to administrative and student accounts.
- Determine if the department is extending credit to customers
with past-due balances by comparing current customers with customers
with past-due balances. Inquire why any additional credit is extended.
- Obtain and review department's most current reconciliation
of customer ledger balances (or other records by customer) with
the aging of accounts receivable and the balance of accounts receivable
recorded on FRS. If a current reconciliation is not performed,
reconcile total of customer ledger balances to accounts receivable
recorded on FRS.
- Document if there are any intra-university accounts receivable
and determine if the reason for establishment of these accounts
is in compliance with sponsored research policies and guidelines.
- Examine confirmation replies. Investigate and document explanations
for any exceptions.
- Mail second requests for positive confirmation where replies
were not received after 14-21 days from the date of the original
request.
- If the customer did not return the confirmation, perform alternative
procedures such as examination of customers' payment subsequent
to the audit date as evidence of the existence of the account
balance.
- Summarize confirmation results.
- Judgmentally select a sample of past due accounts receivable
(or as an alternative, consider statistical sampling). Review
collection efforts on each accounts selected and record details
in the working papers. Review procedures for coordinating collection
efforts with the Fiscal Office.
- Examine procedures and documentation for accounts receivable
previously written off and review controls to insure all were
properly authorized.
- Examine procedures and documentation for accounts receivable
sent to campus Fiscal Office to put on BRS and review controls
to ensure all were properly recorded on BRS.
RATE SETTING
- Review the department's method of setting rates to determine
if cost studies are prepared, costs are tracked, and rates are
approved.
- Send a confirmation letter to the Computing, Telecommunications
and Information Services (CTIS) to confirm the latest rate table
supplied to Telecommunications.
- Select a sample of long distance charges from administrative
and student billing. Manually recalculate charges from rate tables
and compare results.
- List additional audit steps determined necessary during the
audit. Obtain Director's approval.
- Prepare interim recommendations, complete workpapers and prepare
an audit draft report. Submit for review. Clear review notes.
Complete audit report. Set up exit conference.
- If, as a result of your work on this program, you have any
suggestions for revising this program, indicate below and describe
your suggestions.