Auditing: A Risk Based-Approach to Conducting a Quality Audit

10th Edition

ISBN: 9781305080577

Author: Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher: South-Western College Pub

See similar textbooks

Videos

Textbook Question

Chapter 5, Problem 55RSCQ

Professional guidance indicates that the auditor should consider revenue recognition to be high risk in planning an audit of a company’s financial statements.

a. Identify the activities that affect the revenue cycle.
b. Identify the financial statement accounts typically associated with the revenue cycle.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Chapter 5, Problem 54RSCQ

Chapter 5, Problem 56RSCQ

Chapter 5 Solutions

Auditing: A Risk Based-Approach to Conducting a Quality Audit

Ch. 5 - Prob. 1TFQ Ch. 5 - Prob. 2TFQ Ch. 5 - Prob. 3TFQ Ch. 5 - Prob. 4TFQ Ch. 5 - Prob. 5TFQ Ch. 5 - Prob. 6TFQ Ch. 5 - Prob. 7TFQ Ch. 5 - Prob. 8TFQ Ch. 5 - Prob. 9TFQ Ch. 5 - Prob. 10TFQ

Ch. 5 - Prob. 11TFQ Ch. 5 - Prob. 12TFQ Ch. 5 - Prob. 13TFQ Ch. 5 - Prob. 14TFQ Ch. 5 - Prob. 15TFQ Ch. 5 - Prob. 16TFQ Ch. 5 - Prob. 17TFQ Ch. 5 - Prob. 18TFQ Ch. 5 - Prob. 19TFQ Ch. 5 - Prob. 20TFQ Ch. 5 - Prob. 21TFQ Ch. 5 - Prob. 22TFQ Ch. 5 - Prob. 23TFQ Ch. 5 - Prob. 24TFQ Ch. 5 - Prob. 25MCQ Ch. 5 - Prob. 26MCQ Ch. 5 - Prob. 27MCQ Ch. 5 - Prob. 28MCQ Ch. 5 - Prob. 29MCQ Ch. 5 - Prob. 30MCQ Ch. 5 - Prob. 31MCQ Ch. 5 - Which of the following accounts would not be...Ch. 5 - Prob. 33MCQ Ch. 5 - Which management assertion addresses whether the...Ch. 5 - Prob. 35MCQ Ch. 5 - Prob. 36MCQ Ch. 5 - Prob. 37MCQ Ch. 5 - Prob. 38MCQ Ch. 5 - Prob. 39MCQ Ch. 5 - Prob. 40MCQ Ch. 5 - Prob. 41MCQ Ch. 5 - Prob. 42MCQ Ch. 5 - Prob. 43MCQ Ch. 5 - Prob. 44MCQ Ch. 5 - Prob. 45MCQ Ch. 5 - Prob. 46MCQ Ch. 5 - Prob. 47MCQ Ch. 5 - Prob. 48MCQ Ch. 5 - Prob. 49RSCQ Ch. 5 - Prob. 50RSCQ Ch. 5 - Ray, the owner of a small company, asked Holmes,...Ch. 5 - Prob. 52RSCQ Ch. 5 - Prob. 53RSCQ Ch. 5 - Prob. 54RSCQ Ch. 5 - Professional guidance indicates that the auditor...Ch. 5 - Prob. 56RSCQ Ch. 5 - Assume that an organization asserts that it has...Ch. 5 - Prob. 58RSCQ Ch. 5 - Prob. 59RSCQ Ch. 5 - Prob. 60RSCQ Ch. 5 - Prob. 61RSCQ Ch. 5 - Prob. 62RSCQ Ch. 5 - Prob. 63RSCQ Ch. 5 - Prob. 64RSCQ Ch. 5 - Prob. 65RSCQ Ch. 5 - Prob. 66RSCQ Ch. 5 - Prob. 67RSCQ Ch. 5 - Prob. 68RSCQ Ch. 5 - Prob. 69RSCQ Ch. 5 - Prob. 70RSCQ Ch. 5 - Prob. 71RSCQ Ch. 5 - Prob. 72RSCQ Ch. 5 - Prob. 73RSCQ Ch. 5 - Prob. 74RSCQ Ch. 5 - Prob. 75RSCQ Ch. 5 - Prob. 76RSCQ Ch. 5 - Prob. 77RSCQ Ch. 5 - Prob. 79RSCQ Ch. 5 - Prob. 80RSCQ Ch. 5 - Prob. 81RSCQ Ch. 5 - Prob. 82RSCQ Ch. 5 - Prob. 83RSCQ Ch. 5 - Prob. 84RSCQ Ch. 5 - Prob. 85RSCQ Ch. 5 - Prob. 86RSCQ Ch. 5 - Prob. 87RSCQ Ch. 5 - Prob. 89RSCQ Ch. 5 - Prob. 90FF Ch. 5 - Prob. 91FF

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

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.

Recommended textbooks for you

Auditing: A Risk Based-Approach (MindTap Course L...
Accounting
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Cengage Learning
Auditing: A Risk Based-Approach to Conducting a Q...
Accounting
ISBN:9781305080577
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:South-Western College Pub
Contemporary Auditing
Accounting
ISBN:9781337650380
Author:KNAPP
Publisher:Cengage
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Pkg Acc Infor Systems MS VISIO CD
Finance
ISBN:9781133935940
Author:Ulric J. Gelinas
Publisher:CENGAGE L