AUD | Searching for Buried Treasure

The Elusive Completeness Assertion for Revenue, Part 2

Howard B. Levy, CPA

Last month, this column discussed identifying and addressing risks of material revenue understatements in general, and those specific risks presented by outsiders who control and have an incentive to intentionally—or sometimes unintentionally—underreport the transactions or activities that generate revenues that are based on contractual requirements with others, such as customers, lessees, or licensees. This column continues by discussing 1) special risks associated with the use of managing agents who are entrusted with, among other functions, the collection of and accountability for revenues, and 2) risks associated with fraudulent behavior by management (such as that motivated to minimize income taxes) or against the company (such as employee theft, commonly motivated by economic stress).