Final answer:
The incorrect segregation of duties within the revenue process is having different parties 3. perform the shipping and billing functions. Proper segregation involves separating roles such as ordering, billing, and cash receipt to minimize risks and enhance internal controls.
Step-by-step explanation:
Segregation of Duties in the Revenue Process
The key to a robust internal control structure within an organization is the segregation of duties or division of responsibilities to ensure that no single individual has control over all aspects of a financial transaction. This reduces the risk of errors or fraud. In the context of the revenue process, this involves distinct responsibilities for order initiation, credit approval, shipping, billing, and cash receipt functions.
Looking at the options provided, the one not representing a key segregation of duty for the revenue process would be having different parties perform the shipping and billing functions (option 3). Typically, the shipping department should be separate from the billing department to prevent any single individual or department from having the ability to both send goods to customers and bill them, which could open the door to fraudulent activity or billing errors.
On the contrary, it is a standard practice for different individuals or departments to handle other combinations mentioned, such as preparing shipping orders and bills of lading, performing credit functions separately from billing, and segregating duties between those who receive cash and those who adjust accounts receivable.
Summing Up the Final Answer
- Distinct parties should prepare shipping orders and bills of lading - Correct segregation.
- Distinct parties should perform credit functions separately from billing - Correct segregation.
- Distinct parties should receive cash and adjust accounts receivable - Correct segregation.
- Distinct parties should not perform the shipping and billing functions - Not recommended segregation.