By Francis
Copyright thebftonline
By Kofi Ayisi Aboagye
Revenue is the heartbeat of every business. It shows how money flows in, whether a company is growing, and ultimately, whether it is sustainable. But for auditors, checking revenue is not just about adding up sales. It’s about making sure the story behind the numbers is true.
Regulators often criticise audits of revenue. Some firms fail to ask enough tough questions, accept management’s version of events too quickly, or focus testing in the wrong places. The danger? Big risks get missed, and the financial story told to investors and the public becomes unreliable.
“Auditing revenue isn’t about maths alone — it’s about trust.”
Why revenue is different
Revenue is rarely straightforward. A clothing retailer, for instance, earns money differently from a construction firm or an e-commerce platform. That means auditors can’t use a one-size-fits-all checklist. They must understand the business model, map out the risks, and design tests that fit the company’s reality.
Key risks often lie in completeness (have all sales been recorded?) and cut-off (are sales booked in the right year?). These may sound simple, but small mistakes here can lead to big misstatements.
Fraud and the human factor
The international auditing standard on fraud (ISA 240) presumes revenue is always at risk of manipulation. Why? Because shifting sales between periods or inflating numbers is a classic way to make a business look healthier than it is.
But mistakes happen when:
Auditors label all revenue as risky, stretching resources too thin.
Or, worse, dismiss fraud risks entirely.
The right balance comes from professional scepticism and, often, from assigning experienced auditors who know what “unusual” looks like.
“Revenue fraud isn’t always big and bold. Sometimes it hides in the details.”
Old habits vs. modern tools
Traditionally, auditors have relied on detailed tests — checking invoices, contracts, and receipts. This works, but it’s slow and sometimes misses the bigger picture.
With most businesses now using accounting or ERP systems linked to inventory and sales platforms, ignoring controls and analytics is like ignoring half the evidence. Testing how these systems work — and whether controls are effective — often provides a sharper lens than endless paperwork checks.
Analytical reviews, when built on solid data, can also reveal whether revenue patterns make sense. Does this quarter’s sales line up with inventory movements? Do discounts and returns fit industry norms?
Technology changes the game
Today’s auditors have powerful tools at their disposal. Document-matching software can cross-check invoices, ledgers, and inventory in seconds. Data analysis can highlight unusual sales spikes or predict income based on stock movements.
This means less time spent on routine ticking and more time focusing on what really matters: identifying red flags before they become scandals.
Write it right, write it once
Finally, no audit is complete without clear documentation. Revenue is a common area where shortcuts creep in — “isn’t that obvious?” is a dangerous assumption.
A good audit file should take the reader on a journey: why certain risks were flagged, why others were not, and how the auditor responded. If another professional can’t follow the thought process, the file falls short of ISA 230 standards.
“Assumptions are the enemy of good documentation.”
Why it matters to all of us
Auditing revenue may sound like a technical exercise, but it has real-world consequences. From small family businesses to global corporations, reliable revenue figures give confidence to investors, employees, lenders, and the public.
In short, strong revenue audits protect trust. And in business, trust is everything.
Kofi is a chartered accountant and internal auditor with over 12 years of experience in finance, corporate improvement advisory, and risk management, particularly within development finance and small businessesFor further engagement, contact the write on [email protected]
