Enterprise Plus (EP) is a software company specializing in enterprise solutions. EP offers a range of software products under multi-year licensing agreements. These products often include initial licensing, periodic updates, and customer support services. EP recognizes revenue based on the percentage of completion method for some contracts and upon delivery for others, depending on the nature of the agreement.

Currently, EP recently introduced a new cloud-based service platform, adding complexity to its existing revenue recognition models. The customer base includes a mix of long-term clients and new customers attracted by the latest offerings. The company is under pressure to meet investor expectations following a public announcement of anticipated growth, especially with the new cloud service.

Required:

1. (2 marks) Discuss two challenges - concerns with at Enterprise Plus.

2. (4 marks) Discuss two (2) potential tests of controls that should be performed during the financial statement audit of this software company, focusing on the contentious issues of revenue recognition. Consider the varied performance obligations, the complexity of licensing agreements, and the mix of traditional and cloud-based service offerings in your response.Use basically in the solution.

3. (9 marks) Discuss three (3) potential substantive tests that should be performed during the financial statement audit of this software company, focusing on the contentious issues of revenue recognition. Consider the varied performance obligations, the complexity of licensing agreements, and the mix of traditional and cloud-based service offerings in your response.

Answer rating: 100% (QA)

Challenges at Enterprise Plus Complexity in Revenue Recognition Introducing a new cloudbased service platform adds complexity to revenue recognition m... View the full answer