Chpt 11, Fraud vs Error 11-4
Amount of revenue earned on franchises is miscalculated
error Aggressive attitude of management toward financial reporting; incompetent chief accounting officer
Recording sales when the customer's payment is contingent upon the customer receiving financing or selling the goods to another party (e.g., consignment sales)
error Aggressive attitude of management toward financial reporting; incompetent chief accounting officer
Intentional overshipment of goods
fraud Recording fictitious sales without receiving a customer order or shipping the goods
Recording cash that represents a liability (e.g., receipt of a customer's deposit) as revenue
error Inadequate accounting manual; incompetent accounting personnel
Recording sales based on the receipt of orders from customers rather than the shipment of goods
error Ineffective billing process in which billing is not tied to shipping information
Inaccurate billing and recording of sales
error Ineffective controls for testing invoices, or ineffective input validation checks and computer reconciliations to ensure the accuracy of databases
Recording sales in the wrong period based on incorrect shipping information
error Ineffective cutoff procedures in the shipping department
Overestimating the percentage of completion on projects by a construction company using the percentage-of-completion method of revenue recognition
fraud Aggressive attitude of management toward financial reporting; incompetent personnel involved in the estimation/ accounting process
Misstating the percentage of completion of several projects by a construction company using the percentage-of-completion method of revenue recognition
fraud Ineffective board of directors, audit committee, or internal audit function; "tone at the top" not conducive to ethical conduct; incompetent individuals involved in the estimation process
Recording franchise revenue when the franchises are sold even though an obligation to perform significant services still exists
fraud Ineffective board of directors, audit committee, or internal audit function; "tone at the top" not conducive to ethical conduct; undue pressure to meet sales targets
Recording sales when the customer is likely to return the goods
fraud Ineffective board of directors, audit committee, or internal audit function; "tone at the top" not conducive to ethical conduct; undue pressure to meet sales targets
Holding the sales journal open to record next year's sales as having occurred in the current year
fraud Ineffective board of directors, audit committee, or internal audit function; "tone at the top" not conducive to ethical conduct; undue pressure to meet sales targets
Recording fictitious sales without receiving a customer order or shipping the goods
fraud Ineffective board of directors, audit committee, or internal audit function; "tone at the top" not conducive to ethical conduct; undue pressure to meet sales targets