Risks of material misstatement: revenues, inventory
Not what you're looking for?
5-34 Risk of material misstatement, assertions
Demand is down for your client, a manufacturer of computer components. Backlogs from prior years are down by providing customer financing and they just cut back from three shifts a day to two shifts a day. Press reports indicate competitors are winning customers. Your client's R&D has not resulted in improved products. Furthermore, a few of your client's customers are experiencing financial difficulties because of slowing demand for your client's products.
What are the implications of these scenarios for revenue? What assertions are likely misstated? What accounts are likely over or under stated? What about inventory? Explain.
Purchase this Solution
Solution Summary
Six assertions and six accounts are mentioned with commentary explaining why.
Solution Preview
See if this gets you started....
a. Consider the implications of the above information for revenues. What assertions, if any, are likely to be misstated? As a result, what accounts are likely to be overstated or understated? Explain your reasoning.
Assertions:
Occurrence: Pressure due to low sales will increase the temptation to stick in some falsified revenue.
Cut off: Pressure due to low sales will increase the temptation to record ...
Education
- BSc, University of Virginia
- MSc, University of Virginia
- PhD, Georgia State University
Recent Feedback
- "hey just wanted to know if you used 0% for the risk free rate and if you didn't if you could adjust it please and thank you "
- "Thank, this is more clear to me now."
- "Awesome job! "
- "ty"
- "Great Analysis, thank you so much"
Purchase this Solution
Free BrainMass Quizzes
IPOs
This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)
Business Processes
This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.
Business Ethics Awareness Strategy
This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.
Marketing Management Philosophies Quiz
A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.
Situational Leadership
This quiz will help you better understand Situational Leadership and its theories.