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First, the background
Recently, "Sponsorship Business Training Learning Notes" has attracted the attention of many industry insiders, and the article is mainly about the on-site supervision and on-site inspection notes of the training of the Shanghai Stock Exchange and the Shenzhen Stock Exchange.
Among them, the internal control requirements for the revenue cycle made me want to nag in detail.
The original text reads:
"Second, the focus of IPO on-site inspection and on-site supervision -- revenue
(a) whether there are deficiencies in internal controls related to the revenue cycle
The whole process walkthrough test places high demands on revenue recognition and corresponding internal controls:
Verification concerns, all information verification is consistent:
(1) Contract management for customers - whether they all sign contracts, and whether there is a written agreement on the agreed rebates
(2) Payment collection management and invoice management - third-party remittance confirmation, whether the contract customer, invoice customer and payment collection customer are consistent
(3) Whether the delivery address recorded in the paper outbound bill is consistent with the delivery address shown in the external logistics statement
(4) The customer who sells the goods has not signed the delivery note
(5) Whether the invoice or logistics order is missing
(6) Whether the packing list or acceptance note has an acceptance signature
(7) Whether the sales order preparation and approval authority are separated
(8) Whether the official seals affixed by the customer in different documents are the same
(9) Income intertemporary
Focus: The walk-through test was originally to understand the internal control of the enterprise, but in the IPO, ! Walk-through test throughout the process! In fact, it is also a detailed test, on the basis of ensuring the authenticity and accuracy of the data, it is also a verification procedure that must be performed to test the internal control of the enterprise.
Sample sizes should start at 100+. ”
Yes, it can be seen that the concept repeatedly emphasized in the revenue cycle is a walk-through test of the whole process, in "From clubs, law firms, investment banking business front desk to investment banking quality control? I mentioned in the article that practitioners need to build their own verification ideas, and walk-through testing is the fastest and most effective means to understand the company's operation during due diligence.
In addition, the sample size should be 100+, which is a very complex system for manuscript collection and sorting.
Second, why is the walk-through test so important?
Walk-through testing was first used in internal control testing, and to be honest, due diligence is only a bit "overkill" in this positioning.
The walk-through test is to collect, sort out and analyze traces and documents under the whole process from the beginning of the business to the end of the business, and the various business processes involved.
1. The walk-through test can understand the company's operating mechanism and the systems involved in the fastest speed, so as to identify internal control risks
In previous articles, the walk-through test has been mentioned many times, and in my opinion, the walk-through test should be the starting point for due diligence entry. Here's why:
In the process of walking through the test, it is necessary to understand and analyze each process node, so that you can understand the company's system, information transmission, process permission setting, etc., then in the contact process, you can identify internal control risks based on which parts of the system have been used, which parts have not used the system, how to collude between systems, whether the key node settings are reasonable, process permissions, etc.
According to this, the first step of the walk-through test should at least understand the process, system, permission settings, the overall grasp of what the enterprise has now, the second step is to evaluate the rationality of the process, system, permission setting and other rationality in detail, to achieve the overall grasp and sorting, find abnormal situations or control deviations, identify internal control risks, verify loopholes to obtain accounting errors.
2. The walk-through test replaces the detail test, and in the due diligence, it can achieve smooth and backward inspection, the whole process of information collusion, problem exposure and retrospective verification are clearer
Taking sales as an example, the relatively simple general process includes "bidding - calibration - sales contract signing - outbound - logistics - acceptance - reconciliation - invoice issuance - payment", any step will leave the corresponding documents, and the whole process is continuous and through, the documents can be corresponding, such as the sale can correspond to a contract/order, the contract order can be checked with the details of the delivery note, the waybill can be checked with the delivery note, etc., which is associated with the logical reasonableness of the date, amount and quantity. Taking the inquiry at the registration stage of Guangdong Jiaqi Science and Technology Education Co., Ltd. as an example, in view of the on-site inspection, it was found that the original logistics documents corresponding to the sales of the issuer's goods were missing. The details are as follows:
"There are two modes of transportation for the products sold by the issuer, either by the customer or by the issuer. The on-site inspection found that the issuer did not retain the relevant documents for the customer's pick-up and handover of the customer's pick-up part; The portion of the Issuer's own vehicle to the loading location, the Issuer did not keep a record of the shipment, and the vehicle fuel reimbursement record failed to distinguish between freight and other purposes; The issuer entrusted the transportation company to carry the part, the issuer did not keep the customer's booking slip and the fax record of contacting the logistics company, did not retain the road transport agreement signed and confirmed by the driver and used as the basis for reconciliation (the agreement recorded the number of transportation), the issuer claimed that the logistics company did not issue transport documents, and settled every month according to the statements confirmed by the seals of both parties, but the inspection found that the statements could not correspond to the sales revenue details one-to-one.
During the reporting period, the issuer had some of its main product revenue without corresponding molds. The issuer stated that the engineering data mold arrangement table listed in detail all the mold models required to produce a certain specification of the product, but only provided 705 copies of the product model mold arrangement table involved in the revenue and mold inversion during the on-site inspection, and the mold model listed in some of the mold arrangement table provided was inconsistent with the company's reply that the mold used for the product, and the delivery date, contract signing date, and mold delivery date in the delivery note were attached to some vouchers were still later than the earliest delivery date of the product. ”
Therefore, from the perspective of due diligence or audit, the whole process through the test can find problems, such as if it is only a simple income draft in the past, that is, the receipt (revenue recognition final certificate), invoice and accounting voucher, it is difficult to support whether there is an abnormality in revenue recognition, at most it can find problems on the date and whether it is signed, and the problems found are easily perfunctory by various explanations. However, the whole process through the test can explore whether there is any abnormality in each link in the entire chain, and if the temporary worker writes incorrectly on the date of the receipt of the receipt, then the whole link is full of holes and cannot be explained clearly by a single work error.
And from the perspective of fraud, the original detail test only needs to sign the receipt as external evidence, and the cost of counterfeiting is lower and less difficult than that of the whole process through the test. This is also why the current on-site inspection and on-site supervision love to make a fuss on the walk-through test, which is more convincing, once it is "shot to death", it is difficult for the issuer to "turn over".
In addition, with a sample size of 100+, I have to say that the number of manuscripts for the entire IPO will increase significantly, and the 100 clips estimate cannot be a direct reflection of whether it can be listed...
Comrades still need to work hard!
Source: Zhewu Investment Bank