Design a substantive audit program with at least two audit procedures over the advertising revenue recognition process:

• Jamie inherited the shares of the company in 2017. She had just completed a bachelor’s degree in accounting and was very excited about becoming involved in the business and applying her skills and education. The fiscal year ended December 31, 2018, brought a return to higher sales levels and a modest net income. Jamie’s management contract, which was renegotiated in 2019, provides for stock options to be granted to her each year based on the percentage increase of AHL’s revenue from one year to the next. On October 2019, Jamie was granted stock options for the first time. She received 4,500 stock options at $2.25 each, the market price on that date.
• To gain greater exposure on the internet, AHL is revamping its website and developing a mobile app. AHL will pay for the costs of running the site and maintaining the app by selling advertising spots to home-decorating companies. So far, AHL has pre-sold 10 spots for $200 each. The advertisements are to run for one month. Unfortunately, delays in website upgrades, as well as mobile app testing and launch, have caused some advertisers to cancel their contracts. Others are threatening to cancel their contracts unless AHL gets the website and mobile app up and running within the next month. AHL’s controller has already recorded the advertising revenue as sales.
  • Write the control test along with the corresponding control objective
  • Indicate the financial statement assertion addressed by the control test
  • Describe the test of control by specifying the population used to select sample, extent of sample selection along with a rationale, relevant audit evidence-gathering technique to be applied, and expected results.

Answer rating: 100% (QA)

Answer Revenue recognition is an accounting concept that dictates how a company re... View the full answer