Analytical Procedure: find inflated sales, Harley-Davidson
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From Case 7, in 2008, Harley-Davidson was accused of inflating sales by recording revenue when shipments were delivered to dealers, instead of when merchandise was sold to customers. Describe the analytical procedure(s) that could have been used to identify the overstatement of accounts receivables and sales. Recommend at least two ways to plan an audit to test for the accuracy of sales, and discuss the types of exception reports needed. Recommend at least two analytical procedures for collecting evidence to ensure compliance with the controls. Provide detailed recommendations.
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Solution Summary
Your discussion is 204 words. Four ideas for testing sales and AR to test for "sell through" completion prior to recording revenue were mentioned.
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Analytical Procedures
Describe the analytical procedure(s) that could have been used to identify the overstatement of accounts receivables and sales.
This is basically "channel stuffing." This is hard to find. Usually the channel stuffing is not even over the year like authentic sales. It is a reaction to a concern about missing targets. So, the stuffing typically occurs at year end. Therefore, the trend of ...
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