Who Cares
What is the major risk in Property plant and equipment?
Residual value and estimated useful life
inventory is valued at ____ of ____ or _____, and must take into account _______
lower of cost or market ,obsolescence
A company recognizes revenue on a transaction that a customer is disputing, do you think the company should recognize the revenue and why?
no, dispute and claims can cause the company to not earn that revenue
what are some things that spook you as an auditor when interviewing predecessor auditor?
inexperienced team
prior history of fraud
recognizing revenue from excessive shipments to resellers which is beyond actual demand is called what?
channel stuffing
You should check prepaid assets for what?
What is the major risk of revenues?
inappropriate period or additional obligations such as contract
it is december 31, 2020 for a retail store. The accountant left for the day for new years eve celebration. The retail store has some customer returns to process. When should they be processed?
why would you want understate revenue?
to smooth out income, meaning to be consistent every year to reduce red flags
Management classifies expenses as assets to do what?
delay expenses
Without _______, auditors work won't be free of bias, and objectivity.
independence
what causes you to have the skeletons when you are trying to audit A/R?
existence and valuation
most common type of fraud is what financial statement line item?
revenue
you made a sale of $100, you billed the customer, but item has not been shipped, how much do you recognize as revenue?
$0, bill and hold
goods on consignment are recognized as revenue, this is appropriate accounting (T/F)
False
what red flag does reviewing a legal invoice have when auditor notices a lawsuit?
potential accrual
The biggest risk for a retail clothing company is?
obsolete inventory
Why would a company want to overstate liabilities?
cookie jar reserves, releasing them into income in later periods
A brand name drug is open to generic drug competition this year, what balance sheet item is most effected?
patent, trademark
Fictitious revenues are a credit, what two types of accounts are generally a debit for this fictitious revenue?
cash and A/R
what kind of businesses would you expect to see declining revenues during pandemic?
those with no online presence
what are top 3 expenses you would most expect to see at a laundromat?
water, electricity and rent
post credit to A/R
Apple sells an iphone to you that comes with a subscription service, how much should apple recognize as revenue?
only the sale of the iphone
A fraudster changes the aging for John customer from 180 days to 30 days, why would someone want to do that?
Avoidance of bad debt writeoff