BU547 Lecture Notes - Lecture 5: Financial Statement, Late Fee, Revenue Recognition

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14 Sep 2017
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Role: ca, audit senior in a mid-sized professional services firm. Required (writing memo to engagement partner) (1) identify and comment on accounting issues (2) prepare and draft audit planning memo (ramp) (3) comment on audit procedures (4) recommendations for improvements to the dvd rental market program. Other notes: private company (aspe, users, bank (new user); concerned with profitability, management; any potential incentive to overstate earnings due to the bank"s concern with profitability. Accounting issues: movies by mail -> revenue recognition (performance); . 432m, collectability, measurement. Inventory of previously viewed dvds -> valuation . 526 m: no late fees -> revenue recognition (collectability); . 539m, rentpoints liability -> measurement, website -> capitalized vs expense [however, lack of information]; . 5m. Ranking based on (users focus): (1) materiality (2) complexity (3) judgement. The rentpoints is more complex than the inventory issue, because it is easy to determine nrv in this case () compared to the complexity of the rentpoints liability.

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