A motor carrier has three audit centers: how much revenue belongs to the period, whether fuel and operating costs are complete, and whether a heavy equipment fleet is carried at a supportable amount.
Revenue recognition for carriers
Freight transportation is delivered over time. A public freight carrier states this directly. CSX's Form 10-K for fiscal year 2025 says it recognizes revenue over the transit time of freight as it moves from origin to destination, dividing revenue for shipments in progress at period end by transit time in each period. The same filing records its trucking subsidiary's revenue gross, ratably over transit time, and records other revenue such as demurrage and storage when the service is complete.
For a small or mid-size carrier the practical policy has two forms:
- Recognize revenue and the related direct costs when the load is delivered, applied consistently. A smaller carrier can apply it only when the difference from transit-time allocation is not material.
- Allocate revenue for loads in transit at year end by days in transit and expense driver and fuel cost as incurred.
The policy choice matters less than consistency and a measured effect. The audit should quantify loads picked up before year end and delivered after, and compare the two policies on that population.
Accessorial charges such as detention, lumper fees, fuel surcharges, layover and tarps need a separate look. Some are billed with the load and some are billed weeks later after the customer disputes them. Test collectability and the revenue constraint on disputed accessorials. See variable consideration and the constraint.
Brokered loads, where the carrier tenders freight to another carrier, raise the gross or net question. The analysis is in the principal vs agent guide.
Risk areas
Revenue cutoff. Trace pick-up and delivery dates on bills of lading and proof of delivery documents to the load in the dispatch system and to the invoice date. Test deliveries in the last week of the year and the first week after.
Unbilled revenue. Loads delivered but not invoiced because proof of delivery is missing sit in an unbilled account. Age it and reserve for write-offs.
Fuel and operating costs. Fuel is a major variable cost. Compare fuel purchases to miles driven and to reported fuel tax gallons. Large movements in miles per gallon by truck point to unrecorded fuel, personal use or theft. Fuel taxes across jurisdictions depend on miles traveled in each jurisdiction, so the accrual for tax due at year end needs a mileage report, not an estimate.
Insurance and claims. Auto liability and cargo claims are a major estimate. Obtain the loss run, open claims report and attorney response, and compare the reserve to deductibles. See search for unrecorded liabilities.
Driver and owner-operator pay. Settlements to owner-operators include fuel advances, escrow and equipment deductions. Test settlements to payments and to contracts. The classification of drivers as employees or independent contractors affects payroll tax exposure and should be documented in the planning file.
Equipment: depreciation, impairment and heavy vehicle tax
The fleet is the main asset. Test additions to purchase agreements and titles, and disposals to bills of sale and to the removal of the unit from the fixed asset register. Review useful lives and salvage values against the trade-in and auction results of the prior fiscal year, because consistently large gains on sale point to depreciation that is too fast, and losses point to depreciation that is too slow. Idle units, wrecked units and units held for sale need an impairment review under the framework in the property, plant and equipment guide.
Financed equipment needs a lender confirmation and a covenant review. Tractor and trailer leases need the lease accounting analysis, including purchase options and residual value guarantees.
The IRS imposes a heavy highway vehicle use tax on highway motor vehicles with a taxable gross weight of 55,000 pounds or more, reported on Form 2290. The return is due by the last day of the month following the month of first use, and the tax period runs July 1 through June 30. State registration of a taxable vehicle requires proof of payment, subject to exceptions listed in the IRS instructions, and the stamped Schedule 1 returned by the IRS serves as that proof. For the audit, agree the Form 2290 count of taxable units to the fleet register and test for units added mid-period.
Worked example
An illustrative example: a carrier's year ends December 31. On December 30 it picks up a load with a $4,200 linehaul charge and delivers it on January 2. Transit is four days, two in the current year and two in the following year. Under a transit-time policy, revenue in the current year is $4,200 × 2 / 4 = $2,100, with driver pay and fuel expensed as incurred. Under a delivery policy, no revenue is recorded in the current year. If the carrier has 60 such loads averaging the same revenue, the difference is $126,000 of revenue. The auditor documents the effect, and whether it is material to the statements as a whole is a judgment under AU-C 320.
On fuel, suppose a tractor logged 96,000 miles and the fuel card shows 18,000 gallons, which is 5.33 miles per gallon. The fleet average is 6.80, which implies about 14,118 gallons for the same miles. The difference of about 3,882 gallons is the item to investigate for personal use, an unreported card or an odometer error.
PBC list
- Dispatch and load report with pick-up, delivery and invoice dates, and unbilled report
- Bills of lading and proof of delivery for year-end loads
- Fuel card statements, bulk fuel logs and fuel tax returns with mileage by jurisdiction
- Fixed asset register, titles, lender statements and Form 2290 filings
- Loss runs, open claims reports and insurance policies
- Owner-operator contracts and settlement statements
- Driver roster with employee or contractor status
Red flags
- Revenue rising faster than loaded miles or tractor count
- Large unbilled balance with no aging
- Fuel purchases that do not reconcile to miles
- Fully depreciated units still on the register or units in service that are not
- Claims reserves that fall while accident counts rise
Sources
- CSX Corporation Form 10-K, revenue recognition note, SEC EDGAR: https://www.sec.gov/Archives/edgar/data/277948/000027794826000006/R20.htm
- IRS, Instructions for Form 2290: https://www.irs.gov/instructions/i2290
- IRS, About Form 2290: https://www.irs.gov/forms-pubs/about-form-2290
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AU-C references are to AICPA Professional Standards, paraphrased here; read the standard itself before relying on a requirement. This page is guidance, not professional advice. Report an error