Bristol-Myers produces and distributes medicines and health care products. In 2002, the company experienced one of its
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In April 2002, the company disclosed that it had used sales incentives to encour-age wholesalers to buy more drugs and health care products than necessary. In July 2002, Bristol-Myers was notified that the SEC was opening a formal inquiry to determine whether the company had inflated revenue by as much as $1 billion in 2001 through the use of sales incentives. 8 The company restated its earnings to remove the amount of excessive sales.
a. Evaluate Bristol-Myers Squibb’s revenue recognition policy. Why did the SEC object to it?
b. If you had been Bristol-Myers Squibb’s auditor, what questions would you have asked the client about the sales incentives? How would you modify the audit risk model to account for them?
c. Identify an internal control procedure that could have prevented the revenue misstatement that occurred.
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Related Book For
Auditing and Assurance Services An Applied Approach
ISBN: 978-0073404004
1st edition
Authors: Iris Stuart
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