Auditing: Restatement of financial statements. Define the deficiency.
Not what you're looking for?
PROBLEM:
The company has found it necessary to restate its financial statements for the past two years due to a material overstatement of revenues two years ago and an equal understatement last year. The errors are due to sales of certain software that allowed the purchasers extremely lenient rights of return. The errors were discovered shortly after the end of the current accounting year. Members of management indicated that the misstatements occurred because they simply didn't know the accounting rules. Now they know the rules, and they won't let it happen again.
REQUIRED:
(1) State the highest level of deficiency that you think the circumstances represent. Is it a control deficiency, significant deficiency, or material weakness?
(2) Explain your decision in the case.
Purchase this Solution
Solution Summary
The cited solution explains the differences between control deficiency, significant deficiency, and material weakness. It also concludes the type of deficiencies presented in the problem.
Solution Preview
ACCT/auditing
PROBLEM:
-The company has found it necessary to restate its financial statements for the past two years due to a material overstatement of revenues two years ago and an equal understatement last year.
-The errors are due to sales of certain software that allowed purchasers extremely lenient rights of return.
-The errors were discovered shortly after the end of the current accounting year.
-Members of management indicated that the misstatements occurred because they simply didn't know the accounting rules.
-Now they know the rules, and they won't let it happen again.
REQUIRED:
(1) State the highest level of deficiency that you think the circumstances represent. Is it a control deficiency, significant deficiency, or material ...
Purchase this Solution
Free BrainMass Quizzes
Accounting: Statement of Cash flows
This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.
Social Media: Pinterest
This quiz introduces basic concepts of Pinterest social media
Writing Business Plans
This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.
IPOs
This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)
Situational Leadership
This quiz will help you better understand Situational Leadership and its theories.