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PCAOB issues practice alert on auditing revenue

  • PCAOB (US Public Company Accounting Oversight Board) Image

Sep 10, 2014

The PCAOB has issued Staff Audit Practice Alert No. 12, "Matters Related to Auditing Revenue in an Audit of Financial Statements,” on deficiencies that it frequently observes during its inspections.

The alert discusses:

  • “Testing the recognition of revenue from contractual arrangements
  • Evaluating the presentation of revenue—gross versus net revenue
  • Testing whether revenue was recognized in the correct period
  • Evaluating whether the financial statements include the required disclosures regarding revenue
  • Responding to risks of material misstatement due to fraud associated with revenue
  • Testing and evaluating controls over revenue
  • Applying audit sampling procedures to test revenue
  • Performing substantive analytical procedures to test revenue
  • Testing revenue in companies with multiple locations”

In its inspection reports, the PCAOB has “consistently identified revenue as one of the most common areas for audit deficiencies.” It thus proposes that auditors “take note of the matters discussed in this practice alert in planning and performing audit procedures over revenue.”

For more information, see the press release and practice alert on the PCAOB’s Web site.

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