Audit procedures

Maybe a review of the supplier accounts to determine the extent of rebates (Dr Supplier Cr Revenue appears to be what the entry has been)

Review a computer print out to establish the physical number of rebates as well as the value – presumably this is a potentially material revenue overstatement so there must be a substantial number of such transactions … or could be very few but each one of those few could involve a substantial amount

Is this a new client? What happened last year? Why wasn’t it seen … or was it? And did we report it last year

Establish whether it’s normal practice in the industry to have supplier rebates and to what extent is it ‘normal’

With reference to placement fees, what about obtaining copies of the relevant contracts and determining to what extent IFRS15 should be applied

Maybe review correspondence with the employers of the placement personnel trying to establish how the ‘other side’ is treating these placement costs

Review the receivables ledger to determine the extent of these unearned placement fees (Dr Receivables Cr Revenue appears to be what the entry has been)

For any forensic operation such as this you have to bring materiality into your answer as well as ratio analysis / interpretation

Having discovered the apparent manipulations, I would suggest that the auditor should ask the client to prepare relevant schedules for, separately, the supplier rebates received / accounted for during the year and the placement fees as yet unearned as at the end of the financial year

That would provide our skeptical auditor with a base from which to develop forensic audit procedures always bearing in mind that the client that has been trying to ‘innocently’ manipulate (that’s a bit of a contradiction!) the figures is quite possibly not going to give you full information in these requested schedules … but at least they would be a start point from which to make progress

How many marks was this worth? And have I done enough?