The SEC fined Gemstar-TV Guide International $10 million for overstating its revenue by $250 million from 1999
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KPMG LLP, Gemstar's auditors, was censured for engaging in "improper professional conduct" (Jonathan Weil, "KPMG Is Censured in Gemstar Matter," The Wall Street Journal, October 21, 2004) in connection with its audit work for Gem star. The SEC stated that KPMG allowed Gemstar to record revenue in the absence of customer agreements. According to the SEC, KPMG relied on statements made by Gemstar's executives about its sales rather than gathering evidence to support these statements. 2
What evidence should the auditors have gathered? Suggest a substantive test of balances or of transactions that could have been effective in detecting the misstatement.
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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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