Fraudulent financial reporting involving sales typically results in overstated sales or understated sales

return and allowances.

The following methods can be used to increase sales fraudulently:

*Recording fictitious sales (creating fictitious shipping documents, sales invoices, and so on)

*Recording valid transactions twice

*Recording in the current period sares that occurred in the succeeding period ( improper cut off)

*Recording operating leases as sales

* Recording deposits as sales

*Recording consignments as sates

* Recording sales when the chance of a return is likely

* Following revenue recognition practices that are not in accordance with pFRS

* Recognizing revenue that should be deferred

Sales and Collections Cycle

* Errors in Recording Sales and Collections Transactions

-Errors in recording sales include mechanical errors, such as using a . wrong piece or wrong quantity,
recording sales in the wrong period (cutoff errors), a bookkeeper's failure to understand proper .
accounting.

-Internal controls -are desigrred to prevent or detect many of these kinds of errors.

* Frauds in Sales and Collections

Frauds in sales generally relate to fraudulent financial reporting.

frauds in cash collections relate to misappropriation of assets, typically accomplished by clerks or

management-level employees.

a. Fraudulent Financial Reporting

b. Misappropriation Of Asset : Withholding Cash Receipts

 can be difficult to hide unless a similar amount of revenues or receipts has been
omitted. Analytical procedures can be performed to test the reasonableness of
payroll cost.
C. Inappropriate Assignment of labor Costs to Inventory
A company having difficulty meeting profit targets might assign to inventory labor cost that
should have been charged to expense. Analytical procedures such as comparing costs
incurred to budgeted cost and verification of valuation of inventory are some of the useful
techniques in detecting such fraud.