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How management incentive system based on sales is risk of fraud but not frequent change in supplies??

Can anyone give explanation for this.


K.V. Karthik

K.V. Karthik

CA Inter

34K+

01-May-20

62

Answers (6)

Incentives based on sales may make employees to create fictious or book sales to get incentives....so thats a fraud risk factor. They they must have strong internal controls and internal check at every stage of sale transaction


Divya Talluri

Divya Talluri

CA Inter

140

01-May-20

Divya Talluri

Incentives based on sales may make employees to create fictious or book sales to get incentives....so thats a fraud risk factor. They they must have strong internal controls and internal check at every stage of sale transaction

Thanks but what about frequent change s in supplies not being risk of fraud when compared to mgt incentive system on sales?


Thread Starter

K.V. Karthik

K.V. Karthik

CA Inter

34K+

01-May-20

Change of sales may be real right...so that why it is not always treated as fraud risk factor as it depends on n number of environmental factors....this could be fraud risk factor only when there is not genuine reason for uncertain or sudden changes.


Divya Talluri

Divya Talluri

CA Inter

140

02-May-20

My last explanation is for that only....its not a fraud risk factor untill reason for such change is not genuine....mean you can't simply say there is fraud as and when there is suddden r frequent changes in sales you need to enquire the reasons because there are chances of fraud but there may r may not really fraud happened. So it is not always a fraud risk factor.


Divya Talluri

Divya Talluri

CA Inter

140

02-May-20

All the Best
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