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

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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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