XYZ Corporation, a manufacturing company, engaged ABC Auditing Firm to conduct its annual financial audit for the fiscal year ending December 31, 2022. XYZ Corporation manufactures electronic devices and has experienced substantial growth in recent years. The audit engagement is critical for XYZ as it aims to go public in the next fiscal year. The audit team, led by Senior Auditor Jane Mitchell, has been diligently reviewing the company's financial statements, internal controls, and compliance with accounting standards.

Audit Scope and Objectives: The audit scope includes examining XYZ's financial statements, assessing internal controls, and ensuring compliance with relevant accounting standards. Key objectives are to provide assurance on the accuracy of financial reporting, identify any material misstatements, and evaluate the effectiveness of internal controls.

Findings:

Revenue Recognition:

The audit team discovered that XYZ Corporation changed its revenue recognition policy during the year, recognizing revenue at the point of shipment rather than delivery. This change was not adequately disclosed in the financial statements.

Internal Controls:

While XYZ has a well-established system of internal controls, there were instances where segregation of duties was not effectively implemented. Some employees had access to both the initiation and approval of certain transactions.

Contingent Liabilities:

XYZ Corporation is involved in a legal dispute with a supplier. The audit team identified potential contingent liabilities related to this legal matter that were not adequately disclosed in the financial statements.

Question:

Which aspect of the audit findings is a concern related to XYZ Corporation's revenue recognition policy?

a. Segregation of Duties b. Contingent Liabilities c. Change in Revenue Recognition d. Internal Controls