If management and salespeople are compensated on the basis of achieving high sales targets,there is increased incentive to record sales before they have been earned.In such a situation,the auditor will increase the extent of testing for which of the following transaction-related audit objectives for sales?
A)cut-off and classification
B)classification and occurrence
C)occurrence and cut-off
D)completeness and cut-off

Question

Quizplus · Accepted Answer

In a situation where there is increased incentive to record sales before they have been earned, the auditor would increase the extent of testing for the occurrence and cut-off audit objectives for sales. This is because the risk of recording sales that have not yet occurred or cutting off sales that occurred in a different period is high. Therefore, testing for occurrence and cut-off will help the auditor to ensure that all recorded sales actually occurred in the period under audit and were correctly recorded in the appropriate period, thus reducing the risk of material misstatement in the financial statements.

If Management and Salespeople Are Compensated on the Basis of Achieving