AICPA Alert Calls Out Audit Risks under New Revenue Rule

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Jul 06, 2016

On July 6, 2016, the AICPA issued an Audit Risk Alert entitled “Revenue Recognition: Accounting and Auditing Considerations—2016/17” (the Alert). The Alert is in respect of the new revenue recognition accounting standard, FASB Accounting Standard Update (ASU) No. 2014-09 Revenue Recognition, Revenue from Contracts with Customers (Topic 606). The Alert provides an overview of the new framework for revenue recognition, highlights differences between existing and new requirements, and outlines the many auditing considerations that companies should keep in mind as they adopt the new rule.

While the 110 page Audit Alert should help companies understand the accounting and financial reporting impacts of the new guidance, the real value may be in its focus on helping companies identify where they may have risks of misstatement as a result of adopting the new accounting requirements. A 7-page Protiviti summary of the AICPA alert says preparers and auditors will need to consider whether the company properly applied the new GAAP, whether the company properly applied its own internal accounting policies, the risk of misstatement associated with the nature of the company’s goods and services, and the structure and complexity of the company’s contracts with customers.

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