In short
Channel stuffing is pushing distributors or retailers to buy more than they need near the end of a period, often with extra discounts, extended payment terms or generous return rights, to inflate revenue.
Key takeaways
- Warning signs include sharp year-end sales, rising receivables and days sales outstanding, and heavy returns after year-end.
- Side agreements giving customers return rights can mean control hasn't passed.
- Auditors respond with confirmations of terms, cutoff tests and review of subsequent returns.
Where it's tested
AUD: Fraud Risk — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
Which fraud-related presumption can NEVER be rebutted by the auditor?