scenario: A generous sales related bonus scheme has been introduced in the year.
audit risk: This may lead to sales cut off errors with employees aiming to maximise their current year bonus.
Maam by sales cut-off error we mean that employees may include the sales of next accounting period being in this one to maximise the sales of this period and hence the bonus?
Cut-off errors can go “either way” – e.g. for a 31 Dec y/e recording a transaction in Dec that should be recognised in Jan or vice versa. Please refer to Chapter 20 for more details.