Read the following research paper and answer this question: How can audit seniors prevent material misstatement of revenue in future?( Hammersley, J.S., Johnstone, K. M and Kadous, K., 2011. How do audit seniors respond to heightened fraud risk? Auditing: A Journal of Practice & Theory, 30(3), pp .81-101.)
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- An important task ¡n the audit of the revenue cycle is determining whether a client has appropriately recognized revenue. a. What is the five-step process that companies should use in recognizing revenue? Why might the auditor need to do additional research and consider additional criteria on revenue recognition? b. The following are situations in which the auditor will make decisions about the amount of revenue to be recognized. For each of the following scenarios, labeled (1) through (6): . Identify the key issues to address in determining whether or not revenue should he recognized. . Identify additional information the auditor may want to gather in making a decision on revenue recognition. . Based only on the information presented, develop a rationale for either the recognition or nonrecognition of revenue. 1. AOL sells software that is unique as a provider of Internet services. The software contract includes a service fee of $19.95 for up to 500 hours of Internet service each month. The minimum requirement is a one-year contract. The company proposes to immediately recognize 30% of the first-year’s contract as revenue from the sale of software and 70% as Internet services on a monthly basis as fees are collected from the customer. 2. Modis Manufacturing builds specialty packaging machinery for other manufacturers. All of the products are high end and range in sales price from $5 million to $25 million. A major customer is rebuilding one of its factories and has ordered three machines with total revenue for Modis of $45 million. The contracted date to complete the production was November, and the company met the contract dare. The customer acknowledges the contract and confirms the amount. However, because the factory is not yet complete, it has asked Modis to hold the products in the ware house as a courtesy until its building is complete. 3. Standish Stoneware has developed a new low-end line of baking products that will be sold directly to consumers and to low-end discount retailers. The company had previously sold high-end silverware products to specialty stores and has a track record of returned items for the high-end stores. The new products tend to have more defects, but the defects are not necessarily recognizable ¡n production. For example, they are more likely to crack when first used in baking. The company does not have a history of returns from these products, but because the products are new, it grants each customer the right to return the merchandise for a full refund or replacement within one year of purchase. 4. Omer Technologies is a high-growth company that sells electronic products to the custom copying business. It is an industry with high innovation, but Omer’s technology is basic. In order to achieve growth, management has empowered the sales staff to make special deals to increase sales in the fourth quarter of the year. The sales deals include a price break and an increased salesperson commission but not an extension of either the product warranty or the customer’s right to return the product. 5. Electric City is a new company that has the exclusive right to a new technology that saves municipalities a substantial amount of energy for large-scale lighting purposes (e.g., for ball fields, parking lots, and shop ping centers). The technology has been shown to be very cost effective in Europe. In order to get new customers to try the product, the sales force allows customers to try the product for up to six months to prove the amount of energy savings they will realize. The company is so confident that customers will buy the product that it allows this pilot-testing period. Revenue is recognized at the time the product is installed at the customer location, with a small provision made for potential returns. 6. Jackson Products decided to quit manufacturing a line of its products and outsourced the production. However, much of its manufacturing equipment could be used by other companies. In addition, it had over $5 million of new manufacturing equipment on order in a noncancelable deal. The company decided to become a sales representative to sell the new equipment ordered and its existing equipment. All of the sales were recorded as revenue.Explain the benefits of positive risk taking for individuals accessing services.Research "Auditor's Discussion and Analysis (AD&A)”. Do you think AD&A is a good idea? Explain your reasoning.
- Before taking a job as an auditor, what things should they keep in mind? Explain.How specifically do you contribute to or impact the financial health of your organization? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.Urgent Please answer a soon as possible. Answer must be plagirism free What is the role of auditors and explain the importance of the role.
- One problem facing insurers is that there is a risk that a person will act differently if he/she does not bear all of the consequences of his/her actions. For instance, people with auto insurance policies may drive less carefully than they would drive if they were going to have to pay the full amount of any damages they caused/created. This problem is known as: A. Adverse selection B. Consumer deception C. Moral hazard D. Insurance fraud•Read the text below and fill in the missing words, making your choice from the words given. You will not need to use all the words. •WORDS AS OPTIONS •Internal, threat, profession, revision, demands, sensitive, future, power, interest, promise, reject, accountability, dynamic, mend, mechanism, competence, changing, mobile, needs, role, expectation, groups, social and society. Text/Passage •The audit is a …(a).. control…(b)..for securing the …(c)..of the company and its directors. The audit function is a product of the …(d)..of …(e)..and as such it is a …(f)..not a static one. The profession must continue to be …(g)..to the …(h)..needs of the various…(i)..groups. The emergence of the kind of …(j)..gap to which reference has already been made, represents a potential …(k)..to the future of the …(l).. As auditors and the apparent users of audited financial statement change, society may …(m)..roles formerly considered acceptable. Professional groups, such as auditors, must continually be…Use FASB-ASU No. 2016-01 to address the following questions. What is the percentage of ASU 2016-01 dissenters to the total number of FASB members? What does this percentage imply to you about the quality of this ASU? Discuss the reasons why Messrs. Linsmeier and Siegel dissented. Be sure to discuss why the ASU 2016-01 fails to meet the three objectives of the financial instrument project.
- DUE CARE (AICPA) What are some examples of a difficult situation that due care may face? What would an ethical response be to thoses examples be? And lastly why might a practitioner be tempted to or accidentally not take an ethical course of action? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.6. Risk assessment most commonly focuses on two criteria - impact and likelihood. As an organization's risk assessment process evolves, what other criteria might be valuable to consider and why? 1. They should also consider changes in the process since the last audit because that will help them better understand impact and help answer questions about what caused the issue.For insurance companies risk management is critical to the success and viability of their business. As a result, they have therefore adopted strategies to manage the risks they are exposed to. You are required to: Discuss the importance of establishing an effective risk management policy at insurance companies to manage underwriting risks, giving one example of a risk management strategy used by insurance companies to mitigate such risks.