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While completing the audit of Dayside LLC, the external auditors, Daybreak CPA Firm have noticed...

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Accounting

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While completing the audit of Dayside LLC, the external auditors, Daybreak CPA Firm have noticed that for revenue entries up to three months old, no inventory has been shipped out accordingly. Based on this, what is the auditors' most likely conclusion and course of action? The auditor is likely to conclude that an increased risk of fraud is now present, and will attempt to obtain written assurances from management that the entries are not fictitious. The auditor should presume this represents a fraud risk, and attempt to verify the sales transactions as well as why inventory has not been shipped out. The auditor should presume that the revenue entries are fictitious and propose adjusting entries to remove these from the books: The auditors should assume that the client is committing fraud, and examine inventory turnover ratios throughout the year to corroborate this

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