Q. Revenue recogntion as per Accounting Standard

Question

Dear Sir /Ma'am

During Audit, it comes to our notice that client is booking the revenue in books as per booking of goods instead of delivering the goods.

When the questions asked, they told us that they are OEM, as per their contract revenue will be booked at the time of booking instead of Delivering the goods.

But as per my understanding as per Accounting Standard or IND AS , revenue must be booked only when significant risk is transferred. 

So what should our response against their response and whether we can qualify report based on this point ??

Answer 1

Check, what is its accounting policy for recognition of revenue. If its on FOB basis, then ascertain, when are risks and rewards transferred. If revenue is recognised before transfer of risks and rewards, then appropriate qualification for non-compliance should be made by auditor.