Discussion:Revenue Recognition and Purchase Orders

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Discussion Forum Index --> Accounting Questions --> Revenue Recognition and Purchase Orders

Karendhill (talk|edits) said:

3 November 2009
My client is insisting on booking a purchase order as revenue for October. I prepare a monthly compilation for this client, without disclosures. I told him the revenue should not be recognized until the product is shipped in November. He doesn't care what I say about it. What is my potential liability here?

UTdave1 (talk|edits) said:

3 November 2009
Stand your ground. Go over with the client the rev rec rules especially that revenue is recognized when earned. Put the onus on the client to justify to you how the revenue has been earned. Even if immaterial in $ amount this is an important issue in tone at the top. This could just be an education issue - but if not and the client does not back down I would consider whether this is a client you want to be associated with.

TexCPA (talk|edits) said:

3 November 2009
try this

[[1]]

TexCPA 19:12, 2 November 2009 (CST)

Jerrykern (talk|edits) said:

3 November 2009
Hey, great link TexCPA!


Karendhill, the circumstances where revenue is booked before shipment and/or provision of service are so infrequent as to be almost nonexistent. Unless you're talking about an immaterial amount, this is an error that you're aware of, so even though you're not providing attest services, you've got a duty to have it fixed or walk away. I don't think in compilation services you have the duty to do audit procedures, but once you know about an issue, you can't stick your head in the sand.


Good luck.

Captcook (talk|edits) said:

4 November 2009
I was just discussing the obligations of a compilation today with a colleague and this is what we both remember (and follow). To properly do a compilation, you have to basically review the statements, but aren't required to document those procedures. If everything check out, no problem. If it doesn't, then you must basically audit the portions that don't until you are satisfied that they are reasonable or walk away.

I agree with Jerry. No ignoring what sounds like sheer disregard for the standards. You may be better off letting them walk anyway. The fees you would charge them may pale in comparison to the lawyer's fees to defend you in court.

Karendhill (talk|edits) said:

4 November 2009
My thanks to everyone for their replies and for the link to the AICPA document on revenue recognition. I have forwarded the link to my client and told him I can't book the sale yet. So far, I haven't been fired. We'll see what happens.

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