You are assigned as a staff auditor for a high growth technology company that is in the process of planning for an IPO in 2 3 years. You are reviewing the sales of new technology and notice that sales growth is double digit and has increased considerably. Most of the sales occur in December (last month of the year). Management tells you that initial stock price is contingent on high sales growth. The CFO also confides in you that he is planning on retiring in a few years and is dependent on a high IPO stock price to make his retirement dreams come true in the next two years.

1.Are there any red flags regarding sales reporting? Explain.

2.What are the possible issues of concern based on the red flags?

3.Describe how you would alter the audit plan to address these issues?