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Scenario: Assume that you are an auditor of XYZ company which has an annual sales of 25000-30000 units of the only product (Product A). On

Scenario: Assume that you are an auditor of XYZ company which has an annual sales of 25000-30000 units of the only product (Product A). On reviewing the companys records, you observe that the majority of the annual sales have occurred in the last month of the financial year. Annual sales have not materially changed over the past three years.

Question: As an auditor, which of the following approaches you think would be most appropriate concerning the timing of conducting audits to verify the accuracy of revenue numbers?

At an interim date, the auditor should perform analytical procedures and discuss any possible changes in the sales levels with executive management.

Review the year-end compensation to determine whether bonuses were paid in order to meet the income goals of the company.

Inspect the transactions which occurred in the last month of the financial year and analyze the related sale contracts to determine that revenues were posted in the proper period.

At an interim date, perform tests of controls to obtain audit evidence about the effectiveness of internal controls over sales.

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