Following are examples of control deficiencies that may represent significant deficiencies or material weaknesses. For each control deficiency, indicate whether it is a significant deficiency or material weakness. Justify your decision.
a.
The entity uses a standard sales contract for most transactions. Individual sales transactions are not material to the entity. Sales personnel are allowed to modify sales contract terms. The entity’s accounting function reviews significant or unusual modifications to the sales contract terms but does not review changes in the standard shipping terms. The changes in the standard shipping terms could require a delay in the timing of revenue recognition. Management reviews gross margins on a monthly basis and investigates any significant or unusual relationships. In addition, management reviews the reasonableness of inventory levels at the end of each accounting period. The entity has experienced limited situations in which revenue has been inappropriately recorded in advance of shipment, but amounts have not been material.
b.
The entity has a standard sales contract, but sales personnel frequently modify the terms of the contract. The nature of the modifications can affect the timing and amount of revenue recognized. Individual sales transactions are frequently material to the entity, and the gross margin can vary significantly for each transaction. The entity does not have procedures in place for the accounting function to regularly review modifications to sales contract terms. Although management reviews gross margins on a monthly basis, the significant differences in gross margins on individual transactions make it difficult for management to identify potential misstatements. Improper revenue recognition has occurred, and the amounts have been material.
c.
The entity has a standard sales contract, but sales personnel frequently modify the terms of the contract. Sales personnel frequently grant unauthorized and unrecorded sales discounts to customers without the knowledge of the accounting department. These amounts are deducted by customers in paying their invoices and are recorded as outstanding balances on the accounts receivable–aging. Although these amounts are individually insignificant, when added up they are material and have occurred regularly over the past few years.
Answers: 1
Other questions on the subject: Business
Business, 21.06.2019 20:40, stephanie37766
Ail industries uses activity-based costing to assist management in setting prices for the company's three major product lines. the following information is available: activity cost pool estimated overhead expected use of cost driver per activity cutting $1,000,000 25,000 labor hours stitching 8,000,000 320,000 machine hours inspections 2,800,000 160,000 labor hours packing 960,000 64,000 finished goods units compute the activity-based overhead rates. (round answers to 2 decimal places, e. g. 12.25.)
Answers: 2
Business, 22.06.2019 10:50, dbhuggybearow6jng
Melissa is a very generous single woman. before this year, she had given over $11,400,000 in taxable gifts over the years and has completely exhausted her applicable credit amount. in the current year, melissa gave her daughter riley $100,000 and promptly filed her gift tax return. melissa did not make any other gifts this year. how much gift tax must riley pay the irs because of this transaction?
Answers: 2
Business, 22.06.2019 20:00, kylewinfrey2638
If an investment has 35 percent more nondiversifiable risk than the market portfolio, its beta will be:
Answers: 1
Business, 22.06.2019 22:30, mayalp
Selected information about income statement accounts for the reed company is presented below (the company's fiscal year ends on december 31): 2018 2017sales $ 4,400,000 $ 3,500,000cost of goods sold 2,860,000 2,000,000administrative expenses 800,000 675,000selling expenses 360,000 312,000interest revenue 150,000 140,000interest expense 200,000 200,000loss on sale of assets of discontinued component 50,000 —on july 1, 2018, the company adopted a plan to discontinue a division that qualifies as a component of an entity as defined by gaap. the assets of the component were sold on september 30, 2018, for $50,000 less than their book value. results of operations for the component (included in the above account balances) were as follows: 1/1/18-9/30/18 2017 sales $ 400,000 $ 500,000 cost of goods sold (290,000 ) (320,000 )administrative expenses (50,000 ) (40,000 )selling expenses (20,000 ) (30,000 )operating income before taxes $ 40,000 $ 110,000 in addition to the account balances above, several events occurred during 2018 that have not yet been reflected in the above accounts: a fire caused $50,000 in uninsured damages to the main office building. the fire was considered to be an infrequent but not unusual event. inventory that had cost $40,000 had become obsolete because a competitor introduced a better product. the inventory was sold as scrap for $5,000.income taxes have not yet been recorded. required: prepare a multiple-step income statement for the reed company for 2018, showing 2017 information in comparative format, including income taxes computed at 40% and eps disclosures assuming 300,000 shares of common stock. (amounts to be deducted should be indicated with a minus sign. round eps answers to 2 decimal places.)
Answers: 3
You know the right answer?
Following are examples of control deficiencies that may represent significant deficiencies or materi...
Questions in other subjects:
Biology, 24.02.2020 18:02
English, 24.02.2020 18:02
Social Studies, 24.02.2020 18:02
Mathematics, 24.02.2020 18:03
