Assignment

Your client owns a shopping center with 30 retail tenants. All of the leases provide for a fixed dollar amount plus a percentage of sales in excess of a certain dollar amount. The leases also provide that the shopping center may engage a CPA to ensure all sales are properly reported to the landlord.

You have been requested to audit the records of Happy Joe's restaurant to determine if sales of $420,000 for the year ended December 31, 20x4, are correct. Happy Joe's entered into a five year lease agreement on January 1, 20x3. The restaurant provides food service only, with no alcohol sales. Wait staff use prenumbered restaurant checks for customer orders, and all checks are paid by cash or check at the cash register. The proprietor, an accountant by background, operates the cash register.

What issues do you see in auditing the restaurant's revenue?