Interesting Audit Update

As per SA we have to perform risk based audit that means where there is more risk then more audit efforts, we don’t treat all areas equally while selecting audit procedures.

Many researches has identified that revenue recognition is very sensitive area and it is prone to misstatement.

Hence when #SA240 was drafted, it is specifically mentioned in Para 26 that PRESUME that there will be risks (Not high risk just risks) in revenue recognition, so automatically we pay more attention to revenue recognition checking.

But this presumption is rebuttable that means if we have reason to justify no risk, then we can ignore this presumption and go for simple / limited audit procedures and we have to document reasons.

For example if company get revenue from single leasehold property and there is long term agreement for many years then there is no risk in revenue recognition of rent.

CA Ravi Taori