[OneStepAwayCPA]

Becker Q # 02838:

Which of the following is least likely to aid the auditor in evaluating the risk

of improper revenue recognition due to fraud?

a) analysis of sales commissions over the most recent 5-yr period

b) comparisons of sales volume, as determined from recorded revenue

amounts

c) trend analysis of revenues and sales returns by month

d) comparison of revenue by month and by product line for current and prior

years.

the answer is A, but i do not understand as to why

[Anonymous]

One would think that a high commissions would lead to fraud but you have to look at other documents to prove it. Saless Commissions are based off of sales , so the only thing that can be said for sure about high commission rates is: the commission expenses are high. It doesn't say anything about fraud in the revenue stream.

[OneStepAwayCPA]

kinda makes sense, how does this compare to the other answer choices?

[Anonymous]

Well the questions “least likely to use.” An auditor would use those other procedures in an assessment of revenues. In what order, I would guess: B, C, D… But that's my best guess.

[kb24]

Improper revenue recognition is often due to channel stuffing. Comparisons that look at sales volume month by month or sales returns compared to sales volume can identify if sales are excessively high at the end of each quarter or year and/or if sales return % is higher than normal after a high month of sales. The wording of answer b is pretty broad, but a is less likely to be of help so it's the “correct” answer.

FAR 4/1/11 - 89
AUD 4/15/11 - 85
REG 4/29/11 - 80
BEC 5/13/11 - 85

[mla1169]

I'm with KB on this. Answer A might indicate fraud, but if you had to order the answers given to show which of those you might try first, second, third and fourth, I think A would always be #4

FAR- 77
AUD -49, 71, 84
REG -56,75!
BEC -75

Massachusetts CPA (non reporting) since 3/12.

[Author]

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