PREVENTING MISSTATEMENTS IN THE FINANCIAL STATEMENTS. Nutech Company provides data processing services for small and medium-size businesses. The president of Nutech has a compensation agreement that provides for a base salary plus 1% of Nutech’s income before taxes for the year.

During January 19x3, Nutech’s auditors discovered that service revenues and, consequently, income before taxes had been overstated by $450,000 in the previous year.

An investigation indicated that several adjusting entries had been made to record revenue earned but not collected. These entries had been requested by the president, based on information and documentation that he claimed to have for service contracts that he had sold and was supervising.

REQUIRED:

Recommend what Nutech can do to make it less likely that the financial statements can be purposely misstated.