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What is professional skepticism's role in detecting fraud? What is misappropriation of assets and what controls mitigate it? What is the fraud triangle? What is the auditor's responsibility for fraud under ISA 240? What should the auditor do if fraud is suspected or identified during the audit? What is the difference between the auditor's and management's anti-fraud responsibilities? What is the significance of the team's fraud discussion (brainstorming)? Does an unmodified audit opinion guarantee there is no fraud? How does the auditor address the risk of management override of controls? How does discovering fraud affect the auditor's assessment of the whole audit?
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Auditing & Assurance › Fraud & Error Responsibilities

Why is revenue recognition presumed to be a fraud risk?

Intermediate

Answer

ISA 240 presumes fraud risk in revenue recognition because revenue is the primary performance metric users focus on, giving strong incentives to manipulate it (premature or fictitious sales, channel stuffing, holding books open). Its volume and cutoff sensitivity create opportunity. Auditors must specifically address this presumption or document why it doesn't apply.
Real-world example The auditor tests period-end cutoff and reviews late contracts because revenue is a presumed fraud risk under ISA 240.

Common follow-ups: What manipulation techniques target revenue? | Can the presumption be rebutted?

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All 18 Fraud & Error Responsibilities questions