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“Not always high risk
…..One example of simple revenue streams would be where a company leases properties for fixed annual amounts over a fixed period of time. If this is the case, the reasons for not treating revenue as a high fraud risk area must be fully documented by the auditor.”
ma’am I don’t quite get this point. can you possibly explain with an example?
doubt 2) same question’s-part a) different point
“Volume of transactions
There is also usually a high volume of revenue transactions during a financial period. As the volume of transactions increases, the risk of failing to detect fraud and error using traditional, sample based auditing techniques also increases.”
ma’am could you explain this also with an example? as in which traditional sample techniques don’t work? this point sounds intuitive, but I don’t want to assume I understand it thoroughly, when I just have a vague understanding of it.
Many thanks as always!
See page 55 of the notes:
“Significant risk – a risk of misstatement which is close to the upper end of the spectrum of
inherent risk OR treated as significant [i.e. PRESUMED] in accordance with an ISA (e.g. revenue recognition).”ISA 240 says revenue recognition should be PRESUMED to be a significant risk except in the simplest of cases – what you have quoted is the simplest of cases – i.e. a single revenue stream.
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