| 1. |
Definition |
| 1.1 |
A credit memorandum (hereafter referred to as 'credit memo')
is a formal financial document that reduces (or credits) the
value of the original invoice issued to a customer. The need
to issue a credit memo may be due to:
- return of goods by a customer
- resolution of a dispute about services provided where
it is agreed that a lesser amount is owed by a customer
- incorrect tax code used
- non-attendance at a workshop or short course
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| 2. |
Risks |
| 2.1 |
Credit memos can be used to hide fraud. Controls therefore
need to be in place to minimise this risk. |
| 2.2 |
Credit memos need to be processed accurately and efficiently
to reduce the risk of financial misstatement. The accuracy of
financial statements can be affected if a credit memo has not
been issued as the original invoice has overstated revenue and
therefore net surplus. |
| 2.3 |
The need to issue credit memos may reflect inefficient administrative
practices associated with raising invoices. These inefficiencies
should be addressed to reduce the need to issue credit memos. |
| 3. |
Procedures |
| 3.1 |
The main controls in place to to provide reasonable assurance
that credit memos are issued appropriately are:
- adequate and appropriate documentation
- adequate and appropriate authorisation
- segregation of duties
- post hoc periodic review
|
| 3.2 |
Credit memos will only be issued if the following requirements
are met:
- the credit memo request must be supported by adequate
explanation and supporting documentation. This must include
the reason for the credit memo request and include a reference
to the original invoice.
- the credit memo request must be signed by the person who
requested the original invoice and must be authorised by
the supervisor of that person.
|
| 3.3 |
Credit memos processed by the central Accounts section must
be counter-signed by the Accounts Supervisor. In cases where
credit memos are processed by authorised invoice raising points
in the University, a copy of the credit memo documentation must
be forwarded to the Accounts Supervisor for review. |
| 3.4 |
The Director, Financial Services (or nominee) will undertake
periodic post hoc review on a sample basis to provide assurance
that these procedures have been followed. The review will also
examine the reasons for the issue of credit memos and recommend
action, where necessary, to ensure that correct invoice raising
procedures are followed. |
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