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Audit of a multifaceted special events organization

As an independent financial consultant, you have been hired to audit the books of a multifaceted special events organization. Upon examination of the records, you determine that management intentionally commingled funds between the different divisions of the organization. Explain your response to this situation and justify the recommendations you would present to management.

Solution Preview

The problem does not state whether the organization is a for-profit company or a not-for-profit entity. Although the basic accounting concepts are the same for both, the reporting and compliance is significantly different. Non profit entities reporting to IRS, or to grantors have very specific accounting constraints, but that is not the real issue with the problem.

The issue centers on revenue recognition and the matching concept with the following possible problems:
1. Cash received is a liability until the event takes place. No revenue is earned until the event happens.
2. In most cases, accumulations of ...

Solution Summary

In a 388 word response, the issues are carefully explored. The issues are listed followed by 7 recommendations by a consultant.