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The Anonymous Caller Case 3.3 REQUIRED [11 The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) recently completed a joint project to develop a common revenue standard for US. GAAP and IFRS to improve revenue recognition practices and to remove inconsistencies and weaknesses in revenue requirements. The updated guidance is contained in the Accounting Standards Codification as Topic 606, Revenue from Contracts with Customers. Review that guidance to summarize the core principle for recognizing revenue and briefly describe the five steps needed to achieve the core principle. Also, describe how the 2] Do you think situations like this (ie, aggressive accounting or even financial statement fraud) are common [3] Which financial statement assertion related to sales transactions did management violate when it issued [4] a) What would you recommend to the caller if you were Dr. Mitcheli? (b) What are the risks of continuting 151 What types of audit procedures could an xternal auditor perform that might belp the auditor detect this core principle was not achieved in this situation. in practice? the falsified financial statements? to work with the company? (c) What are the risks of resigning immediately? fraudulent activity? [6] People who study instances of financial statement fraud often note that three conditions are generaly present for fraud to occur. First, the person perpetrating the fraud has an imcentive or pressure to engage in Traud. Second, there is an opportunity for that person to carry out the fraud. Third, the person's artitude or ethical values allows the perpetrator to rationalire the unethical behavior. Describe examples of incentive, opportunity, and attitude conditions that were present in this situation. I71 The AICPA's Code of Professional Conduct outlines key elements of an accountant's professional ethics responsibilities. Briefly describe how the Code is structured and indicate where would you find guidance about the importance of integrity I8J What responsibility, if any, does the caller have to report this situation directly to the bank involved? 191 (a) What other parties, if any, should be notified in addition to the bank? (b) What concerns do you have [10] (e) What pressures or factors willexecutives use to encourage accounting managers and staff to go along Before you respond, think about the risks present if the caller does inform the bank and it later turns out that the caller's assessment of the situation was inaccurate, i.e., there was no fraud. about notifying the external auditors? with this type of situation? (b) What arguments can you use to resist those pressures? (c) How does one determine whether a company is aggresively reporting, but still in the guidelines of GAAR versus fraudulently reporting financial information? PROFESSIONAL JUDGMENT QUESTIONS ltisreprtimendedtharyou eadthe Profetic arjudgment.htroducionfoundatthe pror to responding to the olowing uestions 1111 one o the avironientaetor afectngjudgment is the rast to ohe Judgrnent trabe Bricty deer the book that trap and how plies to the situation afrecting the anonyaious caller 1121 Consulting with others is an important step in making fimportant judgments Could the state board of accountancy be a soufce of advice? The Anonymous Caller Case 3.3 REQUIRED [11 The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) recently completed a joint project to develop a common revenue standard for US. GAAP and IFRS to improve revenue recognition practices and to remove inconsistencies and weaknesses in revenue requirements. The updated guidance is contained in the Accounting Standards Codification as Topic 606, Revenue from Contracts with Customers. Review that guidance to summarize the core principle for recognizing revenue and briefly describe the five steps needed to achieve the core principle. Also, describe how the 2] Do you think situations like this (ie, aggressive accounting or even financial statement fraud) are common [3] Which financial statement assertion related to sales transactions did management violate when it issued [4] a) What would you recommend to the caller if you were Dr. Mitcheli? (b) What are the risks of continuting 151 What types of audit procedures could an xternal auditor perform that might belp the auditor detect this core principle was not achieved in this situation. in practice? the falsified financial statements? to work with the company? (c) What are the risks of resigning immediately? fraudulent activity? [6] People who study instances of financial statement fraud often note that three conditions are generaly present for fraud to occur. First, the person perpetrating the fraud has an imcentive or pressure to engage in Traud. Second, there is an opportunity for that person to carry out the fraud. Third, the person's artitude or ethical values allows the perpetrator to rationalire the unethical behavior. Describe examples of incentive, opportunity, and attitude conditions that were present in this situation. I71 The AICPA's Code of Professional Conduct outlines key elements of an accountant's professional ethics responsibilities. Briefly describe how the Code is structured and indicate where would you find guidance about the importance of integrity I8J What responsibility, if any, does the caller have to report this situation directly to the bank involved? 191 (a) What other parties, if any, should be notified in addition to the bank? (b) What concerns do you have [10] (e) What pressures or factors willexecutives use to encourage accounting managers and staff to go along Before you respond, think about the risks present if the caller does inform the bank and it later turns out that the caller's assessment of the situation was inaccurate, i.e., there was no fraud. about notifying the external auditors? with this type of situation? (b) What arguments can you use to resist those pressures? (c) How does one determine whether a company is aggresively reporting, but still in the guidelines of GAAR versus fraudulently reporting financial information? PROFESSIONAL JUDGMENT QUESTIONS ltisreprtimendedtharyou eadthe Profetic arjudgment.htroducionfoundatthe pror to responding to the olowing uestions 1111 one o the avironientaetor afectngjudgment is the rast to ohe Judgrnent trabe Bricty deer the book that trap and how plies to the situation afrecting the anonyaious caller 1121 Consulting with others is an important step in making fimportant judgments Could the state board of accountancy be a soufce of advice