I reviewed the last 10k filing for the REV Group which was filed on
December 21, 2021. The report can be found here:
https://otp.tools.investis.com/clients/us/rev_group/SEC/sec-
show.aspx?Type=page&FilingId=15421151-229597-
316209&CIK=0001687221&Index=12200
After reviewing the MD&A of the report some of the risks the report
mentions are:
• Decreased sales in fiscal quarter 4 due to seasonality
• Lower Revenues due to production inefficiencies and
shutdowns
• Supply chain issues due to the COVID19 Pandemic
• Changes in tax provision benefits
As related to Revenues being overstated, the risk that sales were
reported in incorrect periods during peak seasons might be identified.
Additionally, the tax provision benefits might be estimated at a
higher level than what is actually recorded at a later date. The auditor
should perform materiality tests related to the manner in which tax
provisions are calculated. Additional tests on revenue should include
tracing sales revenue recognized with shipping records to validate the
period in which the revenue was recognized.
Accounts payable and liabilities could likewise be understated for
some of the same reasons. Again, tax expense could be understated
in relation to the provisions. a Cost of materials might be understated
during a period in which revenue is recognized for sales associated
with those materials. Additionally, discounts associated with
accounts payable could be overstated by taking unearned early pay
discounts, effectively reducing the accounts payable liability, only to
be paid back at a later time. a An auditor should run tests to determine
the materiality in which the tax liabilities are calculated. a Additionally,
a test should be ran to determine that all associated material costs
have been properly recorded in relation the sales revenue. a Lastly, a
sample of early pay discounts should be tested for validity and
timeliness.
