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Exam AUD topic 1 question 444 discussion

Actual exam question from AICPA's AUD
Question #: 444
Topic #: 1
[All AUD Questions]

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 five-year period.
  • B. Comparison of sales volume, as determined from recorded revenue amounts, with production capacity.
  • C. Trend analysis of revenues and sales returns by month.
  • D. Comparison of revenue reported by month and by product line for the current and prior years.
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Suggested Answer: A 🗳️
Choice "A" is correct. Items other than revenue may affect sales commissions (e.g., changes to the commission structure), and therefore analyzing sales commissions is least likely to aid the auditor in evaluating the risk of improper revenue recognition due to fraud.
Choice "B" is incorrect. An excess of sales volume over production capacity may be indicative of the recording of fictitious sales.
Choice "C" is incorrect. Analysis of sales and returns by month might indicate situations where unauthorized shipments are sent in an effort to overstate revenue.
(Larger than average sales in one month would be followed by larger than average returns in the next month.)
Choice "D" is incorrect. Analytical procedures using disaggregated revenue data may indicate unusual relationships that are indicative of fraud.
by gemazyni at April 5, 2025, 4:39 p.m.

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