Question

Actual sales for 2018: October 222,137 November 259,826 December 77,687 Forecasted sales for 2018: October 138,004...

Actual sales for 2018:

October 222,137

November 259,826

December 77,687

Forecasted sales for 2018:

October 138,004

November 157,154

December 176,304

Based on Above:

1) What inherent weaknesses does this forecast have?

2) Based on this simple preliminary forecast: What audit evidence will the auditor need to obtain during the audit to become comfortable with revenue during Q4?

Business   Accounting   
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Homework Answers

Answer #1

Requirment 1:

The Inherent Weakness of this forecast is voluntarily Decreasing the forecast of sales to easily achieve the targets by the Sales manager to get sales incentives.

This voluntary decrement in the sales forecast can be termed as Buget slack.

Requirment 2:

Audit Evidence need to obtain by the auditor in order to be comfortable with Revenue, that is type of sufficient Appropriate Audit evidence to be obtained by the auditor is:

  • whether the revenue is recorded completly or not
  • whether recorded accurately or not
  • whether cut off date followed or not
  • whether the revenue Transaction Occurred or not

In order to get an evidence about the above, the auditor need to do test of details procedure.

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