Accrual basis of accounting: Accrual basis of accounting means the revenues, and their related expenses of the business are reported during the period in which the event occurs, even if the cash is not exchanged. The revenue recognition principle The revenue recognition principle refers to the revenue that should be recognized in the time period, when the performance obligation (sales or services) is completed by the company. To describe: The four most common revenue-recognition abuses identified by auditors.

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Answer 1

Question

Chapter 5, Problem 5.1BYP

Requirement – 1

To determine

Accrual basis of accounting:

Accrual basis of accounting means the revenues, and their related expenses of the business are reported during the period in which the event occurs, even if the cash is not exchanged.

The revenue recognition principle

The revenue recognition principle refers to the revenue that should be recognized in the time period, when the performance obligation (sales or services) is completed by the company.

To describe: The four most common revenue-recognition abuses identified by auditors.

Requirement – 2

To determine

To describe: The revenue-recognition abuse related to the percentage-of-completion method.

Requirement – 3

To determine

To describe: The reasons forrevenue-recognition abuses which tend to increase or decrease net income in the year.

Requirement – 4

To determine

To describe: The adjustment that reduced the revenue-recognition abuses.

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Required information Chapter 04 Problem 4-31 LO 4-6, 4-9 [The following information applies to the questions displayed below.] Management fraud (e.g., fraudulent financial reporting) is a relatively rare event. However, when it does occur, the frauds (e.g., Enron and WorldCom) can have a significant effect on shareholders, employees, and other parties. The PCAOB's AS 2401, Consideration of Fraud in a Financial Statement Audit, provides the relevant guidance for auditors. Chapter 04 Problem 4-31 Part b LO 4-6, 4-9 b. Select the three conditions that are generally present when fraud occurs: Note: You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Management or other employees have an incentive or are under pressure that provides a reason to commit fraud. Circumstances exist that provide an opportunity for a fraud to be carried…

! Required information Chapter 04 Problem 4-31 LO 4-6, 4-9 [The following information applies to the questions displayed below.] Management fraud (e.g., fraudulent financial reporting) is a relatively rare event. However, when it does occur, the frauds (e.g., Enron and WorldCom) can have a significant effect on shareholders, employees, and other parties. The PCAOB's AS 2401, Consideration of Fraud in a Financial Statement Audit, provides the relevant guidance for auditors. Chapter 04 Problem 4-31 Part c LO 4-6, 4-9 c. Select the items that are most likely to be objectives of the "brainstorming" meeting that is held among the engagement team members: Note: You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. ?Share insights about the entity and its environment and the entity's business risks. ? Provide an opportunity for the team…

Answer 2

Question

Chapter 5, Problem 5.1BYP

Requirement – 1

To determine

Accrual basis of accounting:

Accrual basis of accounting means the revenues, and their related expenses of the business are reported during the period in which the event occurs, even if the cash is not exchanged.

The revenue recognition principle

The revenue recognition principle refers to the revenue that should be recognized in the time period, when the performance obligation (sales or services) is completed by the company.

To describe: The four most common revenue-recognition abuses identified by auditors.

Requirement – 2

To determine

To describe: The revenue-recognition abuse related to the percentage-of-completion method.

Requirement – 3

To determine

To describe: The reasons forrevenue-recognition abuses which tend to increase or decrease net income in the year.

Requirement – 4

To determine

To describe: The adjustment that reduced the revenue-recognition abuses.

Expert Solution & Answer

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Answer 3

Question

Chapter 5, Problem 5.1BYP

Requirement – 1

To determine

Accrual basis of accounting:

Accrual basis of accounting means the revenues, and their related expenses of the business are reported during the period in which the event occurs, even if the cash is not exchanged.

The revenue recognition principle

The revenue recognition principle refers to the revenue that should be recognized in the time period, when the performance obligation (sales or services) is completed by the company.

To describe: The four most common revenue-recognition abuses identified by auditors.

Requirement – 2

To determine

To describe: The revenue-recognition abuse related to the percentage-of-completion method.

Requirement – 3

To determine

To describe: The reasons forrevenue-recognition abuses which tend to increase or decrease net income in the year.

Requirement – 4

To determine

To describe: The adjustment that reduced the revenue-recognition abuses.

Expert Solution & Answer

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Answer 4

Question

Chapter 5, Problem 5.1BYP

Requirement – 1

To determine

Accrual basis of accounting:

Accrual basis of accounting means the revenues, and their related expenses of the business are reported during the period in which the event occurs, even if the cash is not exchanged.

The revenue recognition principle

The revenue recognition principle refers to the revenue that should be recognized in the time period, when the performance obligation (sales or services) is completed by the company.

To describe: The four most common revenue-recognition abuses identified by auditors.

Requirement – 2

To determine

To describe: The revenue-recognition abuse related to the percentage-of-completion method.

Requirement – 3

To determine

To describe: The reasons forrevenue-recognition abuses which tend to increase or decrease net income in the year.

Requirement – 4

To determine

To describe: The adjustment that reduced the revenue-recognition abuses.

Expert Solution & Answer

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Answer 5

Chapter 5, Problem 5.1BYP

Requirement – 1

To determine

Accrual basis of accounting:

Accrual basis of accounting means the revenues, and their related expenses of the business are reported during the period in which the event occurs, even if the cash is not exchanged.

The revenue recognition principle

The revenue recognition principle refers to the revenue that should be recognized in the time period, when the performance obligation (sales or services) is completed by the company.

To describe: The four most common revenue-recognition abuses identified by auditors.

Requirement – 2

To determine

To describe: The revenue-recognition abuse related to the percentage-of-completion method.

Requirement – 3

To determine

To describe: The reasons forrevenue-recognition abuses which tend to increase or decrease net income in the year.

Requirement – 4

To determine

To describe: The adjustment that reduced the revenue-recognition abuses.

Answer 6

Chapter 5, Problem 5.1BYP

Requirement – 1

To determine

Accrual basis of accounting:

Accrual basis of accounting means the revenues, and their related expenses of the business are reported during the period in which the event occurs, even if the cash is not exchanged.

The revenue recognition principle

The revenue recognition principle refers to the revenue that should be recognized in the time period, when the performance obligation (sales or services) is completed by the company.

To describe: The four most common revenue-recognition abuses identified by auditors.

Answer 7

Chapter 5, Problem 5.1BYP

Requirement – 1

To determine

Accrual basis of accounting:

Accrual basis of accounting means the revenues, and their related expenses of the business are reported during the period in which the event occurs, even if the cash is not exchanged.

The revenue recognition principle

The revenue recognition principle refers to the revenue that should be recognized in the time period, when the performance obligation (sales or services) is completed by the company.

To describe: The four most common revenue-recognition abuses identified by auditors.

Answer 8

Requirement – 2

To determine

To describe: The revenue-recognition abuse related to the percentage-of-completion method.

Answer 9

Requirement – 2

To determine

To describe: The revenue-recognition abuse related to the percentage-of-completion method.

Answer 10

Requirement – 3

To determine

To describe: The reasons forrevenue-recognition abuses which tend to increase or decrease net income in the year.

Answer 11

Requirement – 3

To determine

To describe: The reasons forrevenue-recognition abuses which tend to increase or decrease net income in the year.

Answer 12

Requirement – 4

To determine

To describe: The adjustment that reduced the revenue-recognition abuses.

Answer 13

Requirement – 4

To determine

To describe: The adjustment that reduced the revenue-recognition abuses.

Answer 14

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Answer 15

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Answer 16

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Answer 17

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Solution Summary: The author explains the four most common revenue-recognition abuses identified by auditors.

To describe: The revenue-recognition abuse related to the percentage-of-completion method.

To describe: The reasons forrevenue-recognition abuses which tend to increase or decrease net income in the year.

To describe: The adjustment that reduced the revenue-recognition abuses.

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Chapter 5 Solutions