Potential Misstatements in the Revenue Cycle Read the overview below and complete the activities that follow. The revenue cycle is a major cycle for most companies. Accounts receivable, revenue, and other accounts are tested through this cycle. Often there are misstatements found, including errors and/or fraud by the client. CONCEPT REVIEW: It is important in testing any cycle, especially revenue, to realize that misstatements will occur and to try to distinguish between errors and fraud. 1. Many instances of misstatement are based on the inappropriate recognition of 2. One way to avoid misstatement of revenue is to ensure the client has proper Revenues are deemed to be earned when the company has obligation. 3. 4. Side 5. can substantially alter the terms of a sale. needs to be assured in order to recognize revenue. what it must do to fulfill its controls errors misstatement revenue risk