Question

1. Phar Mor
   1. For the accounting manipulation of “exclusivity” fees:
      1. How should have the revenue been recorded and disclosed?

2. What are some audit procedures that could be effectively employed?   

Answer 1

1. Phar Mor
   1. For the accounting manipulation of “exclusivity” fees:
      1. How should have the revenue been recorded and disclosed?

Answer: First of all there should be one separate ledger for this exclusivity fees. Never allow to book this expenses in any other ledger. And if there is any income and expenses of exclusivity fees, you need to open two separate ledger for the same. You have to enter all your expenses entries in the ledger related to expenses as well as you have to enter all your income entries in the ledger related to income ledger.

2. What are some audit procedures that could be effectively employed?   

Fist to check whether the entries are passed as per the guideline given above. Then need to check the income/expenses receipt/payment with you bank statement for both income and expenses. You also have to take a separate confirmation statement from the parties to/from whom you have received/paid the exclusivity fees.