Eren Inc. is a listed company in Germany. Eren Inc. has five manufacturing facilities outside Munich and produces auto parts to customers. Eren sells auto parts to customers under freight on board (FOB) shipping point terms. Therefore, revenue is recorded when goods are shipped from the respective warehouse.

Eren Inc. currently uses a sophisticated warehouse management system which allows the company to (1) record sales upon shipment of goods out of the warehouse, (2) automatically price parts sales on the basis of standard pricing tables, and (3) generate multiple reports for the evaluation of Erens operations.

You are the senior on the audit team and have obtained an understanding of the internal controls related to revenue. This understanding was done through the walkthrough of the revenue process. As a result, you arrived at the conclusion that there have been no significant changes in the revenue process since the prior year and have identified the following three risks of material misstatement relating to the recording of sales:

Risk 1: All orders shipped are not recorded as revenue. Risk 2: Revenue is recorded for orders not shipped or fictitious sales. Risk 3: Orders shipped are not recorded accurately to actual quantities shipped and prices per invoice do not reflect approved pricing.

Required

For each of the identified risks indicate the relevant assertion the risk relates to and an effective management control activity to address the risk of material misstatement.

Organize your response for each risk as follows:

R1: Relevant Assertion R1: Control Activity