Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AA Exams › September 2016
- This topic has 3 replies, 2 voices, and was last updated 6 years ago by Ken Garrett.
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- November 28, 2017 at 8:24 am #418565
Hi sir, for september 2016 exam question 16b)
Why is this a deficiency : Sales staff are responsible for assessing new customers creditworthiness and proposing a credit limit, which is then authorised by the sales director.
Thought the sales staff may have sales targets, even if they were to set unrealistic credit limits, anyway it will have to be authorised by the sales director in order to come into force.
This process is controlled. So why is this a deficiency ?
Because in march/june 2017 exam question 18b) its not a deficiency.
Thats why i dont understand why is it a deficiency in this question.
November 28, 2017 at 9:14 am #418588Sales staff and the sales director all want to maximise sales (they are usually judged on sales performance) so have incentive to set generous credit limits.
Better to have credit limits set by independent staff eg in accounts or a specialist credit control department.
November 28, 2017 at 10:48 am #418602Okay sir. So the main point here is because the sales staff have sales targets right ; whereas in march/june 2017 exam the sales staff dont have sales targets.
If they have sales targets its not appropriate to allow them to set credit limits.
Am i right sir ?
November 28, 2017 at 10:56 am #418605Even if there are no specific targets I would say that there is a potential weakness in allowing sales staff/director to approve credit limits. At least the question states that full credit checks are performed, though it does not say who carries out those checks.
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