Discuss the risks to an audit should the client become aware of the materiality thresholds used on audit engagements by the auditing firm. Auditors cannot insist that their clients accept all proposed audit adjustments even those that have an “immaterial” effect on the given set of financial statements, because most clients would refuse to propose audit adjustments.
1. Discuss the general principles or guidelines that dictate when companies are entitled to record revenue and how the $7.8 million barter transaction and the two consignment sales discussed in the case may have violated these principles.
Revenues and gains are realized when products (goods or services), merchandise, or other assets are exchanged for cash or claims to cash revenues are consi...