Question

Competency

Evaluate accounting-related legal and ethical business implications.

Scenario

During your weekly meeting, the Director of Accounting has shared with you the topics discussed at a recent Association of Certified Fraud Examiners (ACFE) meeting. Of particular interest was the agenda item about how some companies have gotten in regulatory trouble with the SEC over their revenue and expense recognition practices. While you both are confident that there are no issues relating to this at your company, you both decided that you wanted to learn more about these cases.

The Director of Accounting wants you to research two such cases and write a summary report to present at the next Accounting Department meeting. The director believes that understanding what has happened to other companies in this area of accounting can help prevent issues in your company.

The Director provides you with the SEC website that they have used in the past to do article searches: www.sec.gov

Instructions

You are asked to select two recent SEC actions against companies (not individuals) that relate to revenue and expense recognition and Prepare a Word document that:

1. summarizes reasons for the SEC actions.
2. identifies the SEC issues related to accounting data and/or operations and the remedial actions assigned and/or penalties given to the company.
3. critiques the remedial actions/penalties.
4. Gives an opinion as to whether you believe they will be effective in preventing future violations by the company.

Answer 1

ANSWER:   

Income is perceived, if the accompanying criteria must be met:

• Enticing proof of a game plan must exist;
• Conveyance more likely than not happened or benefits been rendered;
• The dealer's cost to the purchaser must be fixed or definite;
• Collectability ought to be sensibly guaranteed.

A registrant ought to unveil its bookkeeping approach for the acknowledgment of income in accordance with FASB ASC Topic 235, Notes to Financial Statements. FASB ASC passage 235-10-50-3 thereof expresses that "the exposure ought to include significant decisions as to fittingness of standards identifying with acknowledgment of income . . . ." Because income acknowledgment by and large includes some degree of judgment, the staff accepts that a registrant ought to consistently uncover its income acknowledgment approach. In the event that an organization has various arrangements for various kinds of income exchanges, including bargain deals, the approach for every material sort of exchange ought to be unveiled. On the off chance that business exchanges have different units of bookkeeping, for example, an item and administration, the bookkeeping arrangement ought to obviously express the bookkeeping approach for every unit of bookkeeping just as how units of bookkeeping are resolved and esteemed. What's more, the staff accepts that changes in assessed returns perceived as per FASB ASC Subtopic 605-15 ought to be unveiled, if material (e.g., an adjustment in gauge from two percent of deals to one percent of deals).