alance. Commissions are paid to the Sales Representatives that work for the company. They are required to sign a new employment contract every year which detail the terms of their engagement. Normally commissions are paid
alance. Commissions are paid to the Sales Representatives that work for the company. They are required to sign a new employment contract every year which detail the terms of their engagement. Normally commissions are paid
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
The audit staff assigned to audit Commission on Sales Expenses totaling $2,000,000 used Analytical
Procedures to audit said balance. Commissions are paid to the Sales Representatives that work for the company.
They are required to sign a new employment contract every year which detail the terms of their engagement.
Normally commissions are paid at a rate of 10% on sales generated by each Sales Representative. Total Sales for
the year amounted to $20,000,000 of which 50% was generated by the Sales Representatives.
Perform a Reasonableness Test on the Commission on Sales Expense balance. Describe all
steps involved and advise what the auditor should do based on the results of the test.
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