Question

1. Describe the FASB’s rules or standard on revenue recognition. Where do we find the FASB’s revenue recognition standard? Why is it important for an auditor that will audit sales to understand the revenue recognition standard?

Answer 1

1. The Financial Accounting Standards Board (FASB) is an independent nonprofit organization responsible for establishing accounting and financial reporting standards for companies and nonprofit organizations in the United States, following generally accepted accounting principles (GAAP).
2. Revenue recognition is a generally accepted accounting principle (GAAP) that stipulates how and when revenue is to be recognized. It provides a uniform framework for recognizing revenue from contracts with customers.
3. You can find these standards on https://www.aicpa.org/interestareas/frc/accountingfinancialreporting/revenuerecognition/downloadabledocuments/2014-09_liplan.pdf
4. The most important reason to follow the revenue recognition standard is that it ensures that your books show what your profit and loss margin is like in real-time. It's important to maintain credibility for your finances. Financial reporting helps keep your transactions aligned. It is very improtant for an auditor to have knowledge of Stanadards on revenue recognition in order to assure correctness of revenue of entity.

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