Revenue Recognition Issues Current Issues Term Paper

Control environment: (i) Insistent accounting policies or practices. (ii) Demands from senior management to augment revenues and earnings (iii) Absence of involvement by the accounting or finance department in transactions or in the supervision of arrangements with distributors. (Practice Alert 98-3 Revenue Recognition Issues)

Matters needing special consideration: (i) an alteration in the revenue recognition policy of the company. (ii) Sales terms do not meet the terms with the usual policies of the company. (iii) Longer duration of anticipated payment terms or installment receivables. (iv) Important sales or volumes of sales which are recorded during the or near the culmination of the reporting period. (v) Putting into use substandard contracts or agreements. (vi) Transaction with related parties. In order to reduce the danger of inappropriate revenue recognition, the audit is required to be planned and implemented with a suitable extent of professional disbelief. At the time of planning the audit, the auditor must get a sufficient appreciation of the business and industry of the client, the products of the company, its marketing and sales policies and strategies, the internal control structure, and its accounting policies and procedures linked with revenue recognition.(Practice Alert 98-3 Revenue Recognition Issues)

References

Phillips, Thomas, J; Luehlfing, Michael. S; Daily, Cynthia. M. The Right Way to Recognize Revenue - New FASB Guidance. Journal of Accountancy. June, 2001. Retrieved at http://www.aicpa.org/pubs/jofa/jun2001/phillips.htm. Accessed on 16 March, 2005

Practice Alert 98-3 Revenue Recognition Issues. November 1998. Retrieved at http://www.aicpa.org/pubs/cpaltr/nov98/suppl/firms.htm. Accessed on 16 March, 2005

Project Updates - Revenue Recognition. January 25, 2005. Retrieved at http://www.fasb.org/project/revenue_recognition.shtml#objectivesAccessed on 16 March, 2005

Recent Financial and Disclosure Initiatives - Initiative to Address Improper Earnings Management. Division of Corporation Finance: Current Accounting and Disclosure Issues. Retrieved at http://www.sec.gov/divisions/corpfin/acctdisc_old.htm#currentAccessed on 16 March, 2005

The Business Reporting Model of the Future. November, 2002. Retrieved at http://www.aicpa.org/pubs/cpaltr/nov2002/supps/edu1.htm. Accessed on 16 March, 2005.....