What is Presumed fraud risk in revenue recognition?
AUDFraud Risk
In short
Auditing standards require the auditor to presume that there is a risk of material misstatement due to fraud in revenue recognition, and to treat it as a significant risk, unless the presumption is rebutted.
Key takeaways
- If the auditor concludes the presumption doesn't apply, the reasons must be documented.
- Typical schemes include fictitious sales, side agreements and improper cutoff.
- Responses can include confirming contract terms with customers and testing cutoff.
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?