Common means of revenue recognition fraud and audit measures

Companies often inflated assets and income through the imaginary or virtual minus liabilities and costs less assets and income, inflated the cost of debt and ways to gloss over the report in order to achieve the financing to complete the index higher authorities or avoidance purposes. Which fraud by income is the usual approach to financing in the financial statements issued for the purpose, the performance of the company inflated revenue is the primary means of fraud, this paper focuses on the income of the company common means of fraud and ways to identify fraud and revenue measures to be taken for some analysis.

A common means of income false.

While revenue recognition accounting standards improving accounting standards, but income also will be more subtle means of manipulation. The company, often through in advance, postpone the time of revenue recognition, virtual client, or assuming a one-time revenue will be packed into the main business income to achieve the purpose of cosmetic results.

(Not appropriate during a pair of separate sales, adjusted sales.

Revenue recognition Revenue is the key to solving the recorded point, assuming the existence of the accounting period, the disclosure of information reasonably required vesting period, in order to adjust the operating results of each accounting period, the company will not do the right sales division during the advance or deferred revenue is recognized. tamponade is a distribution channel during the advance to the future income of the vicious promotions, to the buyer by the seller (usually the dealer to provide favorable commercial incentives to induce the buyer purchases in advance in order to achieve revenue growth .

(B fictitious customers or clients based on real and virtual transactions.

In order to increase profits, cosmetic results of this goal, the company will fictitious customers or based on real customer base to simulate the normal operation of the sales process, including customer orders, false, false shipping documents, falsified sales contracts, issuing sales invoices approved by the tax department and so on. Because it is virtual, so the customer orders, shipping documents, sales contracts are false, the seal was forged with the client, but the sales invoice is generally true. Although the invoice will pay more taxes, but a number of companies that pay more taxes is worth it.

(C using a special relationship with some companies manufacture and sale of revenue.

For example, the company will sell to no relationship with third party, and then by its subsidiary will purchase products from third parties, both to increase sales revenue, and also avoid the internal revenue offset. Although the party with the company no legal relationship, but often there is a certain tacit understanding with the company.

(With additional conditions, four pairs of full confirmation of shipment product sales revenue.

Typically, the products have been shipped to confirm ownership of the goods the company's major risks and rewards to the buyer one of the most direct sign, but the product does not mean that income can be given recognition. If the company will be selling to the buyer at the same time, giving it the right to certain sales returns, this time, although the goods have been issued, but the economic benefits associated with the transaction may not be all into the company, then return only the estimated portion not recognized as income. In practice, often with the customer in a formal sales contract signed, not to mention return conditions may mean that risks and rewards of such matters have not yet transferred, but the supplemental agreement will be written into such matters. use of a supplemental agreement to conceal the risks and rewards have not yet transfer of facts.

(E significant in the control of assets under uncertainty in revenue is recognized.

In general, the company only to the degree of the ownership, have the right to obtain a copy of the asset price, that is, if the company assets transferred to the buyer, but still retained ownership of the assets associated with the continuation of management, the not sure of the revenue. such as the sale of housing, land use rights, equity transactions, if not for the transfer of assets, transfer procedures, the related income can not be confirmed.

Second, the main way to identify the fraud.

(A management's credibility and capability analysis.

Management shoulder established sound internal control system and urge their responsibility to be reasonably effective implementation, management, staff conduct, experience, experience, ability and management concepts, methods, style and awareness of risk and control methods will affect the company running a norm. So should management's integrity and ability to evaluate, and treatment should be concerned about whether the management company linked to performance, whether subjected to abnormal pressure, the key management personnel, especially the stability of the financial personnel and other factors, the overall performance of the company to grasp the possibility of fraud.

(Analysis of two products.

Sales are closely related with the production capacity, sales revenue likely to be fictional, but the production capacity is difficult to be tampered with. By analyzing the company's production capacity with the industry data (such as sales and market share information such as cross-cutting review, is that fiction sales effective means. in the enterprise concerned should examine whether there is idle the main production equipment, production cut-off phenomenon of the existence of the workshop, the existence of the backlog of inventory and other phenomena, alone or if these phenomena exist, the reported results of operations compared with previous years there is no corresponding decline, you should consider the possibility of statements are false.

(C market analysis of the situation.

Marketable products is a prerequisite to achieve higher profits, the situation should be fully concerned about the market situation has not improved sales growth, and costs related to changes in trend analysis. Moreover, if the company selling a product or customer over-reliance should also be concerned as a focus area.

(D exist sets for transactions.

If the company sells its products or provide its customers, while labor costs, in the absence of legitimate business reasons for a large number of cases and acceptable to the customer to purchase products or services, and transaction prices are obviously unfair or reciprocity, should be concerned about whether there is use with clients The set of transactions for income manipulation.

(E income mainly from related sales.

To test the market to achieve an important core competence standards. If the company's main revenues from related party transactions, although it can solve the problem of markets for their products, but this is not a company and the market to achieve an independent value judgments and bargaining by the parties to reach , and does not reflect the company's core competitiveness. through sales of related party transactions is recognized, there is uncertainty not only its sustainability, and the transaction size and transaction prices easily manipulated.

(F higher than the increase in accounts receivable sales growth.

This may mean the company to relax credit conditions to stimulate sales. When companies face enormous pressure, the vast majority of sales compensation and sales linked to this sales increase at revenue by easing credit conditions.

(Vii sales revenue and operating cash flow divergence.

Early recognition of revenue is a common way for companies to manipulate earnings, which is characterized by significant sales revenue and operating cash flow of a serious departure from.

Third, the preventive measures.

With the popularity of computer technology and the use of the technology companies are becoming more sophisticated fraud, internal purchasing, production, finance, sales and other departments false accounts really count, to find possible fictitious sales revenue is a big difficulties. In addition to audit the authenticity of income access to contracts, invoices, and other conventional audit procedures ���ⵥ, special attention to the following procedures should be implemented to detect whether there is a false sales.

(A screening of documentary authenticity.

Monetary fund balance from one side of the true or confirmed the authenticity of sales revenue.

(B Perform analytical reviews.

Throughout the whole process of analytical review is an important program, it can be the ratio between data or trend analysis showed that the abnormal relationship between data and unexpected fluctuations in the project. In the review of income, you can use income growth, Sales gross margin, return on sales, accounts receivable turnover, asset turnover analysis of other indicators, and in the horizontal and the other companies in the information industry compared with the longitudinal data of the Company to compare different periods. If differences or fluctuations, should design and implement appropriate procedures to further confirm the above phenomenon is reasonable.

(Three-pronged inventory turnover, testing, production and sales of relevance.

Concerned about the logistics information and avoid carrying heavy things light, perpetual inventory records to trace, concern is also found in the flow of the company's real important means of false sales. The company is a production and business activities, including procurement, production, storage, sales and other complex activities aggregate, these activities often involve planning, procurement, production, warehousing, sales and other departments, stock transfer involves almost every department and aspect of these, invented the sales are generally not associated with real inventory turnover, so to trace the physical flow of inventory can often be effective in exposing the false sales. In addition, the sale of housing, land use rights, options, and other behavior, should also be concerned whether their property rights for the transfer, recognition of revenue related transactions to determine reasonableness.

(D concern about future returns, collection of related records.

Some companies reported year to improve operating results, the end of the year focus on achieving the "sales", but these sales did not really realize, often in return for the sale of subsequent performance. So the balance sheet date should be concerned about whether the large or continuous return and identify whether they return part of the end of centralized sales. In addition, the balance sheet date by the relevant banks and other receivables Jinzhang Dan certificates and records of accounts receivable to recover, the report further confirmed the rationality of revenue recognition.

(E through the examination of other projects to be corroborated.

The company's entire production process is a complete chain, which does not link to any aspect of the review will give us clues, so the company's sales practices are not isolated issues, marketing matters related to implementation will lead to change.

If the increase in sales will lead to packaging materials, utilities, the increase in the company's own commitment to the case of freight, due to the increase in sales of products, shipping costs will be a corresponding increase occurred in the competitive market situation, often accompanied by the increase in sales the increase in marketing costs, including marketing, staff salaries, marketing fees, travel expenses, can use the "packaging", "production cost", "operating expenses" and other items of audit evidence obtained further evidence of income is reasonable.