INSTRUCTIONS FOR STUDENTS

1. 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 U.S. 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 principles for recognizing revenue and briefly describe the five steps need to be achieved to recognize revenue. Also, describe how revenue recognition may not be achieved in this situation.
2. Research PCAOB Auditing Standards on the PCAOB's website to summarize the guidance for auditors in regards to their assessment of the risk of material misstatement related to revenue recognition as well as substantive testing of revenue recognition (recalculate)?
3. Complete the remaining audit steps and document your observations and conclusion via a memo to Madison Cleary. Be sure to provide a basis for your conclusion.