Explanation Revenue recognition is an accounting principle that indicates the process through which revenues are recognized. The accrual basic accounting principle is used for this. It provides a uniform structure for recognizing revenue. The principle remains constant within an organization. It helps in reviewing the line items on income statement. In Auditing Standards, the auditors understand the risk of misstatement done by the fraud. Such misstatement is related to revenue recognition. So the auditor should take more precaution while deal with such situation in revenue recognition. The reasons for the management to fraudulent overstate the revenue: a) For meet the revenue guidance: The management of organization gives revenue guidance for meet the guidance expectations to stock market analyst...

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN: 9781337619455

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

Publisher: Cengage Learning

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Fraud

Fraud in accounting is the planned manipulation of financial documents to make a false appearance of corporate financial health. Moreover, it includes an employee, accountant, or the company itself misleading investors and shareholders.

Question

Chapter 9, Problem 6RQSC

To determine

Introduction:Revenue recognition is an accounting principle which is generally accepted. It identifies the specific conditions through which revenue is recognized. At the time of critical situation, revenue is recognized.

The reasons for auditors consider revenue recognition as a fraud risk factor and the need of fraudulently overstate the revenue by the management

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Chapter 9 Solutions

Auditing: A Risk Based-Approach (MindTap Course List)

Ch. 9 - In the revenue cycle, the most significant...Ch. 9 - Which of the following statements is true...Ch. 9 - Prob. 4CYBK Ch. 9 - Prob. 7CYBK Ch. 9 - Prob. 8CYBK Ch. 9 - Prob. 9CYBK Ch. 9 - Prob. 10CYBK Ch. 9 - Prob. 11CYBK Ch. 9 - Prob. 12CYBK Ch. 9 - Prob. 13CYBK

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Which of the following would a fraudster perceive as a pressure? A. lack of management oversight B. everyone does it C. living beyond ones means D. lack of an internal audit function

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