A computer software firm allows its sales team to make material modifications to standard software contracts.What should be the auditors' primary concern in this situation?
A)Increased risk of misstatement of commissions expense.
B)Increased risk of misstatement of revenue.
C)Increased risk of uncollectible accounts.
D)Increased risk of loss of software copyright.

Question

Quizplus · Accepted Answer

Allowing sales team to make material modifications to standard software contracts increases the risk of misstatement of revenue. This is because the revenue recognition criteria may not be met for modified contracts, or the modifications may have a material impact on the amount and timing of revenue recognized. Auditors should therefore pay close attention to the sales team's modification practices and ensure that revenue recognition is in accordance with accounting standards.

A Computer Software Firm Allows Its Sales Team to Make