Phoenix Real Estate Development Limited is a hotel and resort developer based in Vietnam. Its current projects mainly involve developing time-share vacation property to middle class customers. The business is undergoing rapid expansion and is testing a change in the compensation structure for its sales and office staff. Previously, sales staff focused mainly on direct market called to a list of potential customers purchased from a business consultancy and were compensated based on the hours they spend in the office making calls to potential customers. Under the new structure, sales employees are encouraged to find and develop relationships with potential clients. In return for their effort, each salesperson is reimbursed for their sales related expenses and can earn 10% of the total value of the sales they secure. The sales contracts cost $10,000 for which customers receive access to any of the resorts under Phoenixs management for 1 week a year for 10 years. While the company does not heavily promote this fact, local practice dictates that dissatisfied customers have the right to terminate their contract at any time and received a refund for any unused portion of their contract (prorated at $1,000 per year or part of a year). Under the new agreement, sales staff receive their bonus within 1 month of any new customers signing a contract. The companys management is redesigning its internal controls and has asked you to evaluate the risks involved with implementing the new bonus arrangement for sales employees. Comment on the following:

What is the inherent risk of the new bonus structure relative to the old structure?

How does the introduction of the 10% commission increase the difficulty of calculating payroll expenses?

What are some considerations for designing controls over the reimbursement of expense accounts for sales staff?