Process Number Prepared By Date

Alpha Corporation QTC Internal Audit 20XX

Process Name Region Reviewed By Page
Contract Review and Authorization GLOBAL 1 of 14

START

PROCESS AND CONTROLS OVERVIEW:

Revenues are recognized when (1) persuasive evidence of an arrangement exists, (2) delivery has occurred, (3) the sales price is fixed
or determinable and (4) collectibility is reasonably assured. Hardware revenues are generally recognized at the time of ship ment,
receipt by customer, or if applicable, upon completion of customer acceptance provisions.
Non-Standard Standard Contract
Contract
▪ standard shipping provisions (e.g., FOB shipping point)
▪ standard transfer of title prov isions (e.g., upon deli very of product to customer with no right of refund, et c.
▪ customary pay ment terms (e.g. invoice upon shipment, Net 30)
▪ no cust omer acceptance clauses
▪ no mi lestone clauses
Non-Standard Contract
01 ▪ special shipping provisions (e.g., FOB destinat ion)
▪ titl e transfer provisions (e.g., consigned inventory)
Revenue Controller or designee ▪ deferred bill ing (e.g., pay ment terms greater than 60 days), pre-billing and/or third party fi nancing arrangements
[01] Revi ews and approves contract ▪ customer acceptance clauses
to ensure that the contract' s terms ▪ mi lestone clauses
and conditions are aligned with the ▪ service(s) essent ial t o the functionality of the del iverable
Company's Rev enue Recognition and
▪ enterprise software deliverable(s) and/or Software which is essential to the functionali ty of the deli verables(s)
Contract Authorization Requi rement s
▪ linked transactions
Policies
▪ any information and/or guarant ee
▪ at ypical and/or questionable terms and condi tions
▪ transactions not comfortably classified as standard
Multiple Element Arrangements (MEA) with more than one deliverables are divided into separate units of accounting if the deli vered
item(s) have value to the customer on a standalone basis, and delivery/performance of the undelivered item(s) is probable and
substantially in the control of Alpha. The total arrangement consideration is allocated among the separate units of accounting based
Approved Sales on their relative selling prices and the applicable revenue recognition criteria is considered for each unit of accounting. When applying
Contract the relative selling price method, the selling price for each deliverable shall be determined using vendor-specific objective evidence of
selling price, if it exists; otherwise, third-party evidence of selling price shall be used. If neither vendor-specific objective evidence nor
third-party evidence of selling price exists for a deliverable, Alpha shall use its best estimate of the selling price for that deliverable
when applying the relative selling price method.
For our standard contract arrangements that combine deliverables, each deliverable is generally considered a single unit of
accounting. The amount allocable to a delivered item is limited to the amount that is not contingent upon the delivery of additional
items or meeting other specified performance conditions.
END Unearned revenue is recorded for products or services that either have not been provided or have been provided without meetin g the
criteria for revenue recognition and have been paid for by the customer. Shipping and handling costs billed to customers are recorded
as revenue, with the associated cost charged to cost of sales.
Supporting Manual Control

QTC 01 – Non-standard contracts are subject to the review and approval of the Global Revenue Controller or designee prior to the
contract's sign-off and execution. The review will ensure that the contract's terms and conditions are aligned with the Company's
Revenue Recognition and Contract Authorization Requirements Policies (Control is effective as of Q1-2016 for NAM and will roll out to
international locations before year end).

- Manual Key Control - Manual Non- Key Control -Automated Key Control -Automated Non-Key Control - Key SGR - Non- Key SGR
 Process Number Prepared By Date
Alpha Corporation QTC Internal Audit 20XX
Process Name Region Reviewed By Page
Multiple Element Arrangement (MEA) GLOBAL 2 of 14

Revenue Manager
[04] randomly reviews
contracts for elements and /
End
1. ERP Sales History or products that may require
(Shipping) Report further review or record
2. Backlog & Forecast adjustments, if applicable
Report PROCESS AND CONTROLS OVERVIEW:
Thi s procedure covers the revenue recognition process as i t
relates to multiple arrangement contracts . This also includes the
No revenue recogni tion process for hardware product s and software
products that are subject t o hardware revenue recognition
Revenue Manager requirements.
Revenue Manager
[02] Assesses whether the sales For custom built systems, the revenue process is considered to
[01] Reviews the bookings for
arrangement requires a revenue be complete when (a) product is shipped to the customer, and (b)
the quarter and identifies Is contract value
Yes recognition review based on customer has formally accepted t he product; and a si gned a
large contracts; i.e. $5M for above scope?
materiality and/or inclusion of To
training and installation document has been received; i.e.
NAM and $750K for rest of the To Project s Customer Acceptance Document.
nonstandard terms and Hardware
world (ROW)
conditions. For in-stock (non custom built) systems, t he transaction is
consi dered to be complete when the product is shipped to the
customer; therefore the revenue is recognized at that time;
PA unless the product is shipped FOB destinat ion, in which case, the
16 revenue is recognized when the product is receiv ed by the
Revenue Manager
A customer.
[03] Reviews abov e scope MEA 00-21
contracts for legal and accounting
requirements. Documents rev iew in a Key Manual Control
Revenue Tool?
memo detailing the revi ew performed QTC 16 – Revenue managers or contract rev iewer, report ing to
& how the significant revenue is bei ng the Global Revenue Controller, determines and communicates
recognized in compli ance wit h ASC the requi rements for timely rev enue recognition, accounting
605-25 requirements requirements, reviews signi fi cant sales contracts ($5M for NAM
AMI and $750K for International and above) for compliance with
those requirements, and ensures proper recordi ng in the general
ledger and report ing in the financial stat ements. Documents
review in a memo detaili ng the review performed & how t he
To AMI significant revenue is being recognized in compliance with
revenue recognition requirements

- Manual Key Control - Manual Non- Key Control -Automated Key Control -Automated Non-Key Control - Key SGR - Non- Key SGR
 Process Number Prepared By Date
Alpha Corporation QTC Internal Audit 20XX
Process Name Region Reviewed By Page
Hardware Products GLOBAL 3 of 14

From From Revenue Accountant

MEA A/R [05] Perform SAB104 Analysis and Start
adjustments

[01] Shipment entered into Revenue Accountant PRO CESS AND CONTROLS OVERVIEW:
the system has been shipped [07] On a monthly basis, performs the
and confirmed following activities: Revenues are recognized when (1) persuasive evidence of an
A - analysis and preparation of extended arrangement exists, (2) del ivery has occurred, (3) the sales price i s
warranty amortizations/adjustments fixed or determinabl e and (4) collectibili ty is reasonably assured.
Hardware rev enues are generall y recognized at the time of shipment,
- create JE s for extended warranty
recei pt by customer, or if applicable, upon completion of customer
amortization adjustments acceptance provi sions.
- analysis if potential equipment trade-
A/R Auto ins and records adjustments Key Application Controls (ERP ):
Auto Invoice
Program (ERP )
Invoice - MEA allocations
Process QTC 08A - For hardware shipments, ERP automatically records entries
- Book royalty revenue accruals to recognize cost of goods sold, rev enue, AR , and reli ef of inventory.
- reconcile the shipment report to the
GL to ensure accuracy QTC 13A - The 'Allow Changes to Printed Transactions' parameter is
disabled, to ensure changes t o key fields cannot be made to
08A - account reconciliations
ERP transactions that have already been released. These key fiel ds are
Invoi ce date, shi p to information, bill to information, inv oice type, GL
[02] For hardware shipments, ERP
dat e, terms, FO B point, receivabl es account, frei ght account, quantity,
aut omati cally records entries to
ERP price, account ing rule(revenue recognit ion rule). In addition, ERP
recognize cost of goods sold,
functionalit y does not allow updates t o a transaction once it has any
revenue, AR, and relief of 13A Revenue Accountant act ivity (payment, credit memo, adjustment) against it, regardless of
inventory. [08] Provide analysis to revenue how this opti on is select ed
manager
Key Application Controls (ERP 2):

QTC 08B - For hardware shipments, t he General Ledger within ERP 2

Revenue Accountant automatically records entries to recognize cost of goods sold, revenue,
[03] Generate SO report and AR, and relief of inv entory.
identify any SO that have
QTC 10B - Once an order is inv oi ced; pending shi pper is matched,
been shipped but not yet Revenue Manager released, and revenue is recognized automatically.
invoiced for the month. [09] Review the analysis
QTC 15 - A bil l of lading or equiv al ent shipping documentation is
required prior to releasing the shipment from finished goods i nv entory
in General ledger. W hen a shipper is created, inventory is
automatically reduced for the shipment amount.
Revenue Accountant
[04] Notify AR when to invoice
customer for shipments A
identified as shipped but not Revenue Accountant
invoiced during period end To Period [10] Make necessary
Changes
End No Yes adjustments to analysis as
Required?
instructed by revenue
manager

- Manual Key Control - Manual Non- Key Control -Automated Key Control -Automated Non-Key Control - Key SGR - Non- Key SGR
 Process Number Prepared By Date
Alpha Corporation QTC Internal Audit 20XX
Process Name Region Reviewed By Page
00-21 Control Sheets GLOBAL 4 of 14

From
MEA A B

Revenue Accountant
Revenue Accountant Revenue Manager
[05] Create adjusting journal
[01] Quarterly – prepares the [09]Posts journal entries in PRO CESS AND CONTROLS OVERVIEW:
entries to account for any
revenue allocation for all MEA ERP
reallocated 00-21 amounts
using the 00-21 Control Sheet. Revenue is recognized when (1) persuasive evidence of an
arrangement exists, (2) del ivery has occurred, (3) the sales price i s
fixed or determinabl e and (4) collectibili ty is reasonably assured.
Hardware rev enues are generall y recognized at the time of
Revenue Accountant Revenue Accountant
shipment, receipt by customer, or if applicable, upon completion
To Period of cust omer acceptance provisions.
[02] Enters key inputs into the [06] Submit completed 00-21 End
calculation such as product analysis to revenue manager
shipped, implementation Key Manual Control
for review
hours and number of
QTC 01D - In accordance with ASC 605-25, quart erl y, the revenue
installations that occurred
group calculates an adjustment to revenue to be recorded for the
during the quarter. period utilizing 00-21 Control Sheet s. Rev enue Manager reviews
and approves t he entry.
00-21 Spreadsheets,
00-21 Spreadsheet Journal Entries Supporting Manual Control
Analysis by
customer QTC 01G (international only) - In accordance with ASC 605-25, on
as needed basis, local Finance t eams with support provided by the
01.D Corporate rev enue group calculat e an adjustment to rev enue to
be recorded for the period utilizing 00 -21 Control Sheet s. The
Revenue Manager 01.G Revenue Manager revi ews and approves the calculation and
Revenue Accountant [07] Reviews the 00-21 related revenue adjustments that are processed by the local
[03] Perform 00-21 analysis spreadsheets and journal Accounting teams thru manual journal ent ries.
and create adjusting JEs as entries for accuracy
necessary.

Is Revenue Errors? No B
Contingent?

Yes Yes

Revenue Accountant Revenue Accountant

[04] Make necessary changes [08] Makes necessary changes
to adjusted amounts and to adjusted amounts and
No determine reallocated 00-21
determine reallocated 00-21
amounts amounts.
Creates adjusting JE in ERP as
necessary

- Manual Key Control - Manual Non- Key Control -Automated Key Control -Automated Non-Key Control - Key SGR - Non- Key SGR
 Process Number Prepared By Date
Alpha Corporation QTC Internal Audit 20XX
Process Name Region Reviewed By Page
Software Products GLOBAL 5 of 14

From
MEA

To PROCESS AND CONTROLS OVERVIEW:

Software
Type B Hardware
Type?
Software Products
Apply guidance in ASC 605-20 Type A software product s: typically licensed in standalone
Type A for Services soft ware cont racts.
Type B software products: typically licensed as part of
hardware cont racts and for which revenue is recorded by t he
Apply guidance on 985-605 Sales Planners. This type typically follows hardware processes.
for Software The Revenue Senior Manager is kept apprised by Legal Counsel
Revenue Accountant and Sales representativ es of significant matters that may have
Revenue Manager an accounting impact duri ng the negotiat ion and draft ing of
[05] Reconcile unbilled AR & deferred
[09] Request Revenue Account ant contracts i n order to prevent possible noncompliance with the
revenue & prepare revenue control sheet for
to correct the error Al pha s policies and revenue recogniti on rules.
al l active project s
Revenue recogniti on rules have been defined and are based on
Outside Rev Rec Generally Accepted Accounting Principles, which require a
Yes A
Scope? Yes transaction to be complete in order to recogni ze the related
revenue.

Alpha recognizes revenue when all of the followi ng conditions

Revenue Accountant are met, according to Alpha's Revenue Accounting Policy.
[06] Prepare JEs based on t he recon Errors?
For software arrangements with multiple elements, revenue
VSOE recognition i s also dependent upon the av ailability of v endor-
To VSOE
established for No specific objective evidence (VSOE) of fair value for each of the
deliverables? No undeli vered elements. The lack of VSOE, or the exist ence of
extended pay ment terms or other inherent risks, may affect the
timing of revenue recognition for soft ware arrangements.
Revenue Accountant Revenue Manager
[07] Submit control sheets, recon, JE and [10] Post correcting entry , and
Yes other support s t o Revenue Manager for Sign off on BS recon
review and posting of JE

Revenue Accountant
[01] Reconcile unbilled AR & deferred
revenue for each product line To Period
[2] Prepare JEs based on the recon End

Revenue Manager
[08] Review recon for appropriateness, and
Revenue Accountant
Review rel ated JE and supports
[03] Perform an account anal ysi s dri lldown
in ERP to verify balance

Revenue Accountant
[04] Submit evidence of unbill ed AR &
deferred revenue recon to R evenue Manager
for review.

- Manual Key Control - Manual Non- Key Control -Automated Key Control -Automated Non-Key Control - Key SGR - Non- Key SGR
 Process Number Prepared By Date
Alpha Corporation QTC Internal Audit 20XX
Process Name Region Reviewed By Page
Service Contracts GLOBAL 6 of 14

Start A B
PROCESS AND CONTROLS OVERVIEW:
Thi s procedure covers the creation of a service contract
Legal maintenance agreement within the ERP Service Contracts
[01] Receive signed contract Service Business Rep. module.
from customer and inputs data [07] Manually enters Service Business Manager
maintenance contract [10] Approve Notification Standard Warranty
in Legal Dept. Collaboration
Software site and uploads information in the system When a system is sold at Alpha, a Sales Order generat ed and
contract file ERP Service product shipped. Standard Warranties apply to these products.
Thi s warrant y is tracked i n ERP Serv ice Contracts. ERP creates
Contracts Module
the warranty based off bill of material, as a warranty part
Sales Planner Service Business Rep. number is on the BOM.
[02] Enters data from SO form [08] Runs QA checks to verify Service Business Rep Maintenance Agreement
or PO. Product would be contract is complete. If no [11] Signs Approved Contract
picked, confirmed and shipped. issues, submit for approval Customers have the option to sign a maintenance agreement at
the sale. If they choose to do this, a copy of the service
agreement wil l be posted into Collaboration Soft ware by the
Legal Department. The agreement, which will identify the parts
[3] ERP under maintenance and the price, will be used by the Servi ce
- Serial number information is 07A Representative to create the cont ract.
recorded in ERPInstalled Base Service Business Manager AR Process
[09] Review contract summary Auto Invoice Program Manual Key Control
Record module
- Base Warranty Record is ERP form against contract details in QTC 07A - After a Servi ce Business Representati ve i nputs the
recorded in ERP Service system contract details into ER , a Service Business Manager reviews t he
contract in ERP ensuring t hat the signed cont ract deliv erables
Contracts module
09 are i nput into the system accurat ely . The Manager approves the
Workflow Noti fi cation which generates an automated email
ERP stati ng the cont ract has been approv ed.
Service Business Rep. [12] ERP automatically records
Application K ey Control
[04] Reviews PO against initial unearned revenue &
warranty contract Reject ratably recognize maintenance QTC 09 - For Maintenance revenue, ERP aut omatically records
B No
Notification? revenue over the service period initial unearned revenue. Over the period of service, ERP
aut omatically records entries to reverse (debit) previously
Service Business Rep. recorded unearned revenue and recognize (credit ) mai nt enance
[05] Checks if a customer has a revenue ratably over the serv ice period.
signed maintenance contract in If the Contract is rejected, the Service Manager will provi de
the Legal Collaboration comments for the Serv ice Representative to make the necessary
To Period
Software changes and t he Workflow Notificati on will be rout ed back to
End
Yes the Service Representati ve.

The Serv ice B usiness Representat ive receiv es ERP Workflow

Yes A notifications of all rejected and approv ed orders, so that
Signed a
approv ed contracts can be changed to a status of 'Signed', and
maintenance rejected contracts can be resolved, reviewed and ' Signed'. O nce
contract? Yes the Contract is signed it will go into a st atus of Active or
Signed if the contract has a future start date.

No Once the Contract i s Acti ve it i s ready for Invoi cing. Only

Contracts with a status of Acti ve Signed or Expired (if billed
Signed contract in arrears, which is not Alpha s st andard practice today) can be
Service Business Rep. Time & invoiced.
before warranty No
[06] Prepare maintenance Materials
expires?
package & email to customer
including pricing & agreement
to be signed by customer

- Manual Key Control - Manual Non- Key Control -Automated Key Control -Automated Non-Key Control - Key SGR - Non- Key SGR
 Process Number Prepared By Date
Alpha Corporation QTC Internal Audit 20XX
Process Name Region Reviewed By Page
QTC – Project Accounting GLOBAL 7 of 14

A
From From
MEA VSOE
No
PROCESS AND CONTRO LS OVERVIEW:
Project Manager
[04] Makes budget Manual Key Controls:
10% & $100K
New Project? Active Projects updates, as needed
budget change? QTC 07E – Revenue Manager revi ews and then releases revenue and
New Based on a Signed costs from Project Accounting to the GL in ERP based on approv ed
Change Order revenue and cost budgets.
QTC 07C – Cost budgets for active project codes are monit ored at
Yes least mont hl y and updated, if needed, by project managers. The
revenue group/ l ocal Fi nance team conducts a baseline of the new
budget for projects with 10% and $100K and over modifications of
Revenue Accountant Revenue Accountant contract val ue.
[01] Input new project data in ERP projects 1. SOW [05] Understand updated cost
as reflected in the signed statement of work project
2. Project set-up estimates included in project planning Manual Supporting Controls:
(revenue budget), project planning tool (cost planning QTC 07B – When new projects are set up in ERP, a Revenue Manager
tool template tool per discussion with project
budget) and project set up template as manager. reviews the support underl ying t he cost and revenue budget s pri or to
received from project manager base-lining.
QTC 07D – The Revenue/Financi al Analyst revi ews unsubmi tted
timecards for the month and accrues for any time not posted in ERP .
The Revenue/ Finance Manager rev iews the final cost accrual.
Revenue Accountant
[06] Submit approved revenue cost Application K ey Control:
07B and budgets in ERP Project Accounting PAC 06 - Revenue cannot be recognized in ER if budgets are not
Revenue Manager/Controller
[02] Review and baseline project cost budget, (PA) baselined by revenue managers.
revenue budget, confirm revenue recognition Input
methodology to be used for revenue Estimat es to complete are updated on a web based appli cation
recognition (T&M, Percentage of Completion, Input (project planning tool) by the Project Manager on a monthly basis.
Event/Completed Contract) and all other Revenue Manager Wit hi n ERP :
significant accounting inputs required for [07] Review updated cost estimates
▪ The Revenue Accountant (Finance Analyst role i n ERP ) is
proper operation of ERP Projects. for propriety and approve export to responsible for updating the cost budget.
ERP projects. ▪ Al l updates to the approved cost budget are reviewed by t he
Revenue Manager/Controller.
06
Revenue Manager/Controller ERP Cost Accruals may be used to ensure accurate revenue recognit ion. A
[03] Approves all contract projects Project 07C cost accrual is made when one of the following supporting documents
Revenue Manager
electronically in ERP by changing the status of Accounting A is recei ved:
[08] Rebaseline updated project cost
the project from Unapproved to (PA) • An i nv oice t hat has not been recorded in Accounts Payable
budget once satisfied with accuracy prior to month end cutoff.
Approved Module
and validity of update based on • An expense report that has not been recorded in Accounts
discussions with PM and Pay able prior to month end cutoff.
understanding of status of project • A timesheet with hours incurred during the mont h being closed
that has not been recorded in ER P Projects.
Revenue Accountant 07D
Revenue Accountant • An e-mail/authori zation from a Project Manager or Department
From [09] At period end, Manager indicating t hat a project expense has been incurred
[10] Calculates and Revenue Manager To Project s
Projects requests unsubmitted but the invoice has not been received prior to month end
(10)
accrues for time and [11] Reviews the final (9) A cutoff.
time, uninvoiced/
expenses in ERP via cost accrual
unrecorded expenses
ERP Project Accounting
from PMs

- Manual Key Control - Manual Non- Key Control -Automated Key Control -Automated Non-Key Control - Key SGR - Non- Key SGR
 Process Number Prepared By Date
Alpha Corporation QTC Internal Audit 20XX
Process Name Region Reviewed By Page
QTC – Project Accounting GLOBAL 8 of 14

From
Projects
(8)
PRO CESS AND CONTROLS OVERVIEW:

Thi s procedure covers:

▪ importing expense reports and supplier invoice costs from ERP Payables
▪ importing and dist ributing t ime from ERP Time and Labor (ETL)
Project Administrator ▪ validati ng project expenditures from AP and ETL
[01] Review updated cost ERP Project To Project s ▪ processing expenditure adjustments
estimates for propriety and Accounting (10)
Al l scheduled programs for expense reports, supplier costs, and labor are deactivated during
approve export to ERP Module month-end close by the Project Close Lead and reacti vated after month end cl ose by Project Close
projects. Lead.

Key Manual Control:

QTC 07H - The (1) Transaction Excepti on Detai l by PA Report and (2) Subl edger Period Close
Exception Report are reviewed by the Revenue Manager (Project Close Lead) to ident ify all
43 exception i tems that could not be processed by the Distri but e Labor Cost s process. These reports
44 list the rejection reason for each of the expenditure items that failed cost distribution.
23 25 23 24
Project Administrator/ Close
ERP AP Lead ERP AP Supporting Manual Control:
QTC 07J - The Labor Cost Report (Straight Time) is reviewed by the Projects Close Lead to i dentify
Supplier [02] Reviews the interface Expense costs for all of the straight ti me labor hours successful ly processed by the Di stribute Labor Costs
Invoices reports to ensure data Reports process. For each labor item, this report lists the empl oyee who reported the labor hours, the
imports were successful expenditure and expenditure item dates, the project and task t o which these hours were charged,
and t he number of hours charged.

Supporting Ap plication Controls:

41 42 PAC 23 - Import expense reports to ERP - Each of these transaction sources has the sett ing "Raw
Costs GL Account ed" enabled. By enabl ing this sett ing, t ransacti ons that are i mported from t hi s
ERP transaction source have already been accounted for in GL. ERP Projects expects that the external
Time and system has al ready posted t he raw cost to the appropriate debit and credit accounts. None of the
Labor ERP Project s processes wi ll transfer these costs to GL or AP.
PAC 24 - Import expense reports to ERP - The PRC: Interface Expense Reports from Payables
process is scheduled to run every 8 hours and is run to l oad expense report invoices to ERP
Projects. As a resul t, this process posts project-related expense report invoice accounting ent ries.
PAC 25 - Interface Suppli er Costs process is scheduled to run every 8 hours and is used to i mport
suppl ier invoices from ER P Payabl es.
PAC 26 - Supplier Cost Interface Audit Report is automatically generated and reviewed by t he
Projects Close Lead to determi ne successful supplier costs imports, as well as those suppl ier costs
which failed to import.
PAC 41 - Import time/labor to ERP - Thi s transaction source [ETL] has the setting "Raw Costs GL
Accounted" di sabled. By disabl ing this sett ing, t ransacti ons imported from this transaction source
hav e not been accounted for in GL. Therefore, t he calculation of labor costs occurs in PA and
subsequently sent to the GL from PA.
PAC 42 - Import time/labor to ERP - The PRC: Transaction Import process is run every eight (8)
hours in order to transfer hours from ETL to the PA Int erface Tabl e. An excepti on report is
generated to identify those transact ions that fai led to i mport. The Projects Close Lead revi ews the
exception report.

- Manual Key Control - Manual Non- Key Control -Automated Key Control -Automated Non-Key Control - Key SGR - Non- Key SGR
 Process Number Prepared By Date
Alpha Corporation QTC Internal Audit 20XX
Process Name Region Reviewed By Page
QTC – Project Accounting GLOBAL 9 of 14

Month-end Activities PRO CESS AND CONTROLS OVERVIEW:

From
Projects
(9) A Thi s procedure covers the activit ies associated with generat ing, releasing, and i nt erfacing
revenue to t he General Ledger.
85 Cost Projects – Revenue is recognized based on percent complete, therefore, the PM must
48
Project Close Lead provide the Effort Estimate in order to update t he Cost Budget.
ERP Project Work Projects – Revenue must equal bi llings, t herefore revenue must be run prior to
[04] Interface revenue to the
To Accounting generati ng the invoice and is calcul ated based on quantity and rate.
GL
Cost Accruals Projects Event Projects- In order for rev enue to be recognized accurately and completely, t he PM
Yes (8) sends the actual quantiti es install ed during the month in order to determi ne if project can be
Required?
billed or if an install/meter read has been completed.
48A Project Close Lead
[05] Review all reports to Earned, but Unbilled Project Revenues are cl assified under current asset s as costs in excess
ERP GL validate revenues were of billings.
successfully transferred to the Deferred Revenue consi sts of invoiced but unearned amounts.
Revenue is manually approved (released) in ERP by the respective Revenue Manager/
GL
Controller. The design of Project s responsibil ities control the ability to release revenue.
ERP Project Revenue is automatically approved (released) in cases where a Work based Inv oi ce is
Accounting released. The design of Project s responsibil ities control the ability to release invoices/
revenue.
Module Project Close Lead
[06] Interface costs to the GL A rev enue control sheet is used to reconcile revenue pre and post i nterface to the GL. These
sheets allow the Revenue Manager/Controller to revi ew the revenue by project. Various
types of rev enue control sheets are used to depending on product.

Revenue Accountant Revenue Accountant prepares Rev enue Control Sheet usi ng the costs incurred, cost budgets
Revenue Accountant and rev enue budget s. Based on the cost incurred to date and the cost budget, the
[07] Prepares revenue control
[01] Generate and review Draft cumulative revenue for the project i s determi ned. The monthly rev enue recognized i s
sheet using cost incurred, cost
Revenue for a Single Project, if cal cul ated by the current month cumulativ e recognized less the cumulative revenue
and revenue budgets. recognized from prior periods.
needed A
Key Manual Control:
07 QTC 07F - Revenue Accountant compares the cal cul ated current month rev enue wi th the
Revenue Accountant current mont h rev enue recognized by ERP and investi gat es significant variance.
[08] Revenue Accountant compares
Revenue Manager/Controller the calculated current month revenue Supporting Manual Control:
Errors on Draft
No [03] manually approve (release) with the current month revenue QTC 07G - Revenue Manager rev iews Revenue Control Sheet and compares current month
Revenue?
revenue in ERP recognized by ERP and investigates cal cul ated revenue to the current mont h revenue recognized i n ERP . All significant
significant variance. variances are analyzed and followed-up with the Rev enue Accountant.

Yes Key Application Control:

PAC 75 - Proper project close - ERP PA periods cannot be closed when open transact ions
87 exist .
Revenue Accountant Revenue Manager
[02] Investigate and determine [09] Reviews revenue control
Supporting Ap plication Controls:
if revenue should be sheets and account
PAC 48 - Importing rev enue from projects to ERP GL - The Int erface Revenue to GL option is
unrealeased or deleted to make reconciliations enabled, which indicates to ER P Project s to t ransfer revenue to ERP GL.
corrective action PAC 85 - Access to Generate Revenue and Rel ease Revenue is properly restri ct ed and is
monit ored monthly with notifications and reporting out of O ICM.
75 PAC84 - Access to change AutoAccounting Rules i s restricted to the US - Project Bill ing
Project Administrator Administrat or and the US - Accounts Receiv able Administ rator.
To Period PAC48A – Auto-Accounting Rules and Functions are established in order to sy stematically
[10] Close the current month
End assign proper GL account di stributions t o Project s transactions.
and Open the next month s
Project Accounting Period

- Manual Key Control - Manual Non- Key Control -Automated Key Control -Automated Non-Key Control - Key SGR - Non- Key SGR
 Process Number Prepared By Date
Alpha Corporation QTC Internal Audit 20XX
Process Name Region Reviewed By Page
QTC – Period End Activities GLOBAL 10 of 14

Month-end Activities Quarter-end Activities

PRO CESS AND CONTROLS OVERVIEW

HW, SW,
Start Month-end and Quarter-end activi ties performed by t he Revenue Group.
Servi ce,
Projects Key Manual Controls:
03A
QTC 03B - Transacti ons occurring at or near period end are analyzed and
reviewed to determi ne whet her t hey are recognized in the appropriate
Warehouse Logistics Manager Revenue Accountant/M anager accounting period and reviewed.
17B [05] confirm that all shipments that [09] Perform and account inquiry in ERP
Revenue Accountant were closed in ERP/ ERP 2, physically to identify unbilled A/R with an offsetting QTC 01E - On a quarterly basis, an anal ysi s is performed to calculate the
[01] Prepares a reconciliation left the building. deferred revenue balance requiring gross amount of unbi lled A/R wi th an offsetting deferred revenue requiring
of the deferred revenue down journal entry . gross down journal entry . The analysis and journal entry, if appli cable, are
reviewed by t he Revenue Manager for appropriateness.
accounts.
Enter related JE s as needed QTC 01F (International only) - At least on a quarterly basis, local Finance
Warehouse Logistics Manager teams rev iew the third-party revenue recogni tion and the reconciliation of
01E
[06] collect the packing slips for related account s closing balances, per Revenue Recognition Policy . Thi s
shipments that did not physically analysis is documented in a standard format (Rev enue Book) which is
Revenue Manager/Controller provided to the Corporate Revenue Recognition group.
leave the warehouse and sends [10] The analysis and journal entry, if
Revenue Accountant
these to the Finance team/ Revenue applicable, are reviewed for GLR 02 - Personnel responsible for the review and approv al of journal
[02] Verify deferred revenue
group for their cutoff analysis appropriateness. entries ensure that all necessary entries have been prepared and
balance in ERP. presented timely for review. Journal entries hav e adequate supporting
Submit recon to revenue documentati on and are revi ewed and approv ed by someone independent
manager for review. 03B of the journal entry preparer.
Revenue Accountant
Supporting Manual Controls:
[07] reviews shipment activity by
customer greater than $100,000 in QTC 03A - Warehouse logistics managers confirm that all shipments that
02 the last ten business days of the End were closed in ERP / ERP 2, physi cally left the building. For any shipments
Revenue Manager that did not physically ship, warehouse managers collect the packing slips
[03] Reviews and signs-off on quarter for domestic and the last 30
and prov iding these to the Finance team/ Revenue group to use in their
the BS Recon to evidence calendar days for international.
cutoff analysis.
review. Prepares an adjusting J/E as
Posts JEs and files supports. necessary QTC17B - Subsidiary ledgers and all bal ance sheet accounts are reconciled
monthly utilizing a standardized reconciliation format. R econciling
analyses show compari sons bet ween GL balances, subsidiary ledgers, and
03B supporting documentat ion, and all signi ficant reconciling items are
Revenue Accountant (International) identified, invest igated, and cleared in a timely manner. The appropriate
End [07B] reviews shipment activity by financial manager reviews all reconciliat ions before the financial
statements are finalized and dist ributed.
customer greater than $100,000 and
by transaction greater than $15,000
in the last 5 days of the quarter for
Domestic, 10 days for International
and 30 days for Intercontinental.
Prepares an adjusting J/E as
necessary.

Revenue Manager
[08] reviews the cut-off analysis to
determine whether period end
End
transactions are recognized in the
appropriate accounting period.
Reviews and posts JE

- Manual Key Control - Manual Non- Key Control -Automated Key Control -Automated Non-Key Control - Key SGR - Non- Key SGR
 Process Number Prepared By Date
Alpha Corporation QTC Internal Audit 20XX
Process Name Region Reviewed By Page
Project Review Meetings GLOBAL 11 of 14

Quarterly Project Risk Review Meetings

Revenue Manager
[07] reviews the monthly governance report
issued by the PMO and verifies that any
Start projects that triggered a subsequent
A PRO CESS AND CONTROLS OVERVIEW:
governance meeting have been identified by
the PMO. The results, and any necessary
Revenue Manager Thi s procedure covers quarterly projects rev iew meetings.
follow-up items are summarized and sent to
[01] Filter report on a quarterly the Global Revenue Controller. Key Manual Controls:
basis for all booked sales orders
QTC 20A - For cert ain significant projects that i ndi vidually could have a significant i mpact on
equal to or exceeding $750K. the financial statements due to t he size and complexity of t he contract , Alpha performs a
Review all such transactions for quarterly project ri sk assessment review wit h parti ci pants from Solutions Delivery, PMO,
Order 20C
propriety . Revenue Controller Revenue Accounting, Business Finance, Sal es and Senior Management . Significant i ssues and
Management risks affecting t he project i ncl uding those it ems t hat could affect revenue or expenses
Transaction History [08] reviews the results and findings of the
Revenue Manager s review. greater than $1M are discussed prior to quarter end. The Revenue Accounting team wi ll
Report summarize the issues discussed and determine the financial impact based on the project risk
Revenue Controller
review.
[02] Review and approve all
conclusions reached ELCC 213 - On a quarterly basis, the Ext ernal Reporting team distri but es a compliance
Revenue Manager certification letter that cov ers various areas of risk, including Revenue, Procurement ,
[09] with the assistance of the Revenue Investments, Fi xed Assets, Inventory, Legal, Tax, and other relev ant areas. The certification
Revenue Manager Accountant, will research and recommend letter responses will be accumulat ed by External Reporting and dispersed t o the Regi onal
[03] Participate on governance accounting for issues identified and discussed Controllers and B usiness Fi nance groups for further invest igation and conclusion on the
calls with PMO, Project Team, during the quarterly project risk review issues. This process is expected to suppl ement t he current Issues and Events process and
Business Finance, and/or Sales to meeting. Legal Update process by provi di ng subsequent i ssues that may impact the financial
statements or disclosures.
discuss projects with significant
risks or experienced a significant Supporting Manual Controls:
increase in costs. 20A QTC 20B - A quarterly Issues meeti ng is hel d and at tended by appropriate indivi duals where
Revenue Controller significant risks related to revenue are discussed and conclusi ons are reached. The Revenue
[10] reviews the results and findings of the team prepares an accounting memo to document the accounting implications of significant
Revenue Manager s recommendations issues identi fi ed and discussed during the meeti ng. If journal entri es are identified as needed
Revenue Controller to correctly account for items, they are recorded.
[04] Review project risk and including the high level conclusions discussed
financial reports and submit to in the meeting and the revenue recognition QTC 20C - The Cadence Reports are reviewed by t he Revenue Manager. Revenue Manager
Corporate Controller. memos that include more detailed analysis of reviews results and assesses if any addi tional governance meetings are required. R esults of
the accounting treatment. this review are communicated to the Global Revenue Cont roller.

Revenue Manager
[05] Documents the accounting Issues Log 213
Revenue Controller
impact for each issue listed on
[11] External Reporting team di stributes a compliance certification
the Issue Log.
letter that covers vari ous areas of risk, i ncl uding Revenue,
Procurement, Investments, Fixed Assets, Inv entory , Legal, Tax, and
other relevant areas. The cert ification letter responses wi ll be
20B accumulated by External Reporti ng and dispersed to the Regional
Revenue Controller Controllers and B usiness Fi nance groups for further invest igation
[06] maintains Issue Log with and conclusion on the issues. This process is expected to
input from Revenue Managers. suppl ement t he current Issues and Events process and Legal
The Revenue Controller reviews Update process by providing subsequent issues t hat may i mpact
white paper memos for each of the financial statements or disclosures.
A
the issues log and submits Issue
Log to Corporate Controller.
White papers are available for
review by the Corporate End
Controller upon request.

- Manual Key Control - Manual Non- Key Control -Automated Key Control -Automated Non-Key Control - Key SGR - Non- Key SGR
 Process Number Prepared By Date
Alpha Corporation QTC Internal Audit 20XX
Process Name Region Reviewed By Page
QTC – RSP Analysis (Hardware) GLOBAL 12 of 14

From
Hardware 01C
Revenue Manager
[06] Works with the Revenue
Accountant in preparing the Annual
Relative Sales Price (RSP) Analysis.
Reviews the data provided in the annual
sales price file to ensure that data is
Revenue Accountant PROCESS AND CONTROLS OVERVIEW:
from the reconciled monthly sales
[01] Run Sales History Report for history export files and all twelve
the last 12 months of prior year months are represented. Revenues are recognized when (1) persuasive evidence of an
arrangement exists, (2) delivery has occurred, (3) the sales
price is fixed or determinable and (4) collectibility is
reasonably assured. Hardware revenues are generally
Revenue Manager recognized at the time of shipment, receipt by customer, or if
[07] Identifies unusual transactions or applicable, upon completion of customer acceptance
Revenue Accountant
product groups and Summarizes findings provisions.
[02] Filter and delete all activity
lines other than product sales for Pricing Committee s review. Signs off
(Account 412110 & 412310) on the RSP analysis.
Alpha performs a robust annual hardware relative sales price
(RSP) analysis on the first quarter of every year based on the
RSP hierarchy defined in ASU2009-13 and ASU 2009-14. The
analysis is performed to see if Alpha has vendor specific
Revenue Accountant Revenue Manager, Pricing Committee objective evidence (VSOE) on its hardware and selected
[03] Filter and delete all [08] Revenue Manager reviews the data software products that do not fall on software revenue
customers that are classified as with the Pricing Committee to identify recognition rules.
manufacturers representative any unusual transactions or
and distributor completeness of data.
(Committee consists of a member from Key Manual Control:
each of the business segments) QTC 01C – Annually, a Hardware Relative Sales Price Analysis
is prepared by the revenue group and reviewed by the
Revenue Accountant
Company's pricing committee.
[04] Sort and group by product
line and item group and calculate
total sales in dollars and units Revenue Manager
sold [09] Revenue Manager revises the RSP
Analysis based on the feedback
received.

Revenue Accountant
[05] Establish the mean, low
range (-15%) and high range
(+15%) for the selling price.
Calculate the number of units Pricing Committee
End
that fall within the low and high [10] Approves Pricing Summary
range, expectation is 80%
compliance.

- Manual Key Control - Manual Non- Key Control -Automated Key Control -Automated Non-Key Control - Key SGR - Non- Key SGR
 Process Number Prepared By Date
Alpha Corporation QTC Internal Audit 20XX
Process Name Region Reviewed By Page
VSOE Analysis GLOBAL 13 of 14

Software

14
Revenue Accountant/Manager
[01] Quarterly, pulls a GL Detail
Report from ERP of all software
license and implementation
transactions and reviews the
report to determine which
A
transactions need to be
deferred based on the absence
of VSOE

Revenue Accountant/Manager
[05] Implementation revenue is
Implementation PROCESS AND CONTROLS OVERVIEW:
Yes deferred until all elements have
Revenue Accountant/Manager Rev => $50K?
been delivered under the
[02] Performs a detailed combined services approach Key Manual Control
review of selected contracts. QTC 14 – Quarterly, the Revenue Manager or Accountant
No pulls a GL Detail Report from ERP of all software license and
implementation transactions and reviews the report to
determine which transactions need to be deferred based on
GLR
Revenue Accountant/Manager absence of VSOE.
02
[04] Implementation Revenue
Is License Sold in Revenue Controller/Manager
No is recognized on a percentage
the contract? [06]Reviews and posts the
of completion method (through
journal entries
ERP Project Accounting)

Yes

To
Revenue Accountant/Manager END
Projects
[03] License revenue are
(8)
deferred until all elements have
been delivered under the
combined services approach

- Manual Key Control - Manual Non- Key Control -Automated Key Control -Automated Non-Key Control - Key SGR - Non- Key SGR
 Process Number Prepared By Date
Alpha Corporation QTC Internal Audit 20XX
Process Name Region Reviewed By Page
rd
QTC – 3 Party Sales Commissions International 14 of 14

PROCESS AND CONTROLS OVERVIEW:

START Some Al pha Sit es work with Third Party Sales Agents to support
busi ness in some regions and/or markets. A wri tten Agency
agreement is required for every rel ation with Sales Agents.

Approv ed Sales New Agents and Sales Agents agreements must be approved in
Agent Agreements accordance with t he applicable Signature Authority Policy . The
Finance Manager is responsi ble for ensuring appropriate
approv als are obtained for ev ery agreement with Sales Agents.

For the revi ew and approval process, an Agency Compliance

Checklist listing key cont ract data such as agent contact
information, products, payment, and contract terms is
Business Finance M anager Agency Compliance completed by Sales Management and submitted to the
[01] Ensures that ev ery sales agent Check list Accounting Manager, who will submit thi s to Finance Manager
agreement was approved in accordance with
and t he Legal Department. The sales agent commission
the Signature Authority Policy.
agreement must be up t o date and signed by all intervening
parties.

Key Manual Control

QTC 02 (International on ly) - On a monthly basis, sales
02
Business Finance commission calculati ons for third part y representati ves are
[02] Prepares sales commission accrual prepared based on val id signed agency agreements, are
cal cul ation after customer invoicing has been accurately processed using only approv ed rates and terms,
done based on agreed commission rates per accurate invoice associated amounts and products sold are
valid contract. reviewed and approved by management. The v ariances are
investigated. Sales Commissi ons related JE is reviewed and
Completes sales commissi on summary with approv ed by management.
details of commissions accruals and
pay ables. Sales Agents The Accountant maintains a control checklist detail ing
Commission information such as: contract/ customer order with whom agent
Summary commission is associat ed, commission percentage/ fee,
customer invoicing and respective coll ection i nformat ion, sales
commissions accrued and payabl e/ pai d amounts. This check -list
shoul d ensure traceabi lity of the history of transactions ent ered
Business Finance M anager into with the sales agent, and al low cl ear identificati on of
[03] Reviews and approv es sales agent amounts accrued, pai d and/or adjusted.
commission calculati ons and accruals.
Each month-end, sales agent commissi on calculations and
accruals are revi ewed for accuracy, supported by adequate
documentati on, and approved by the Accounting Manager or
Business Finance Manager. The review should also ensure that
long-outstanding items were adequately identified, v alidated
and approved by the Accounting Manager.

Accoun ting Clerk Accoun ting Clerk AP

[04] Records commission [05] Submits the commi ssion
accruals cal cul ation worksheet t o AP for
Payment
into ERP GL. pay ment Process

End

- Manual Key Control - Manual Non- Key Control -Automated Key Control -Automated Non-Key Control - Key SGR - Non- Key SGR