Rethinking Revenue Testing: When One Size Doesn’t Fit All
If there’s one area we see again and again on cold file reviews, it’s this: revenue testing that hasn’t kept pace with how the business actually earns its money.
Many entities now have several distinct revenue streams — brilliant for them, but often a headache for the audit team. And yet, on so many files, we still see a single, generic sampling approach being applied to all revenue… even when the streams are totally different in nature, risk, and how they’re recorded.
It’s understandable. Revenue is busy. Teams are juggling time pressures. It’s tempting to “just pick a sample” from the whole lot and move on. But when the revenue streams aren’t homogenous, this approach doesn’t just create unnecessary work — it can undermine audit quality.
Why the traditional ‘one big sample’ approach falls down
Each revenue stream usually has its own processes, systems, controls and inherent risks. Treating them as one population ignores those differences and makes it harder to design testing that’s actually responsive to risk.
Take a leisure centre, for example. Income might come from:
Local authority grants
Member subscriptions
Room hire
Café and shop sales
These all behave differently. Grants may involve formal agreements and conditions; subscriptions could be reconciled back to membership data; room hire often has booking records; café income comes from tills and card machines.
If we lump them together and take, say, a 60-item sample across “total revenue”, we’re almost guaranteed to miss something important — and we may even do more work than we need to.
A more effective (and potentially more efficient) approach
Instead, break revenue down into separate populations and think carefully about the risks and characteristics of each one.
For grants, you might test them in full.
For subscriptions, a proof-in-total or controls-based approach might be far more efficient.
For till-based sales, targeted sampling makes sense — but only on that stream, not across unrelated income.
Once you split revenue properly, teams are often surprised to find that sample sizes shrink, not grow. Designing the approach at income stream level can dramatically reduce unnecessary testing.
And if you’re able to rely on good controls or perform analytical procedures like reconciling subscriptions back to membership records? Even better — the sample sizes reduce further while the audit quality strengthens.
The outcome: more insight, less noise
This isn’t just theory. On file reviews, when teams take a stream-by-stream approach, the testing becomes sharper, more relevant, and often lighter. You’re focusing on what really matters and avoiding blanket sampling that doesn’t align with the risks.
Revenue doesn’t have to be painful — but it does need to be purposeful.
Want support reviewing or strengthening your audit approach?
If your team would benefit from a fresh pair of eyes on revenue testing — or if you’d like tailored training that brings this to life with real-world examples — we’re always happy to help. A quick cold file review or a practical workshop can make a huge difference to how confident (and efficient!) your team feels in this area.