Marcus graduated from Washington State University in June 2020. He began his career working for Dunco, a public company that manufactures plasma television monitors. Dunco is the original equipment manufacturer (OEM) of 42 through 64-inch plasma screens. The company sells its monitors to major manufacturers in the United States and overseas. Marcus was hired directly by the internal audit department and reports to Francey Gordon, the director of Internal Auditing.

Marcus was assigned to review sale documents and freight bills to determine the amount of Freight, the terms of the sale, and the proper cutoff treatment. During the course of his examination, Marcus discovered $2.4 million that was prematurely recognized as revenue by the accountants for the year ended December 31, 2020. He identified the problem by matching the invoices with corresponding freight bills and found that the shipping date of the transaction was January 2, 2021. However, there was a note signed by the freight forwarder. "picked up for shipment at Dunco warehouse on December 31, 2020."

Question:

How Should Marcus determine whether the $2.4 million transactions was material? What factors would you consider in making the determination

Answer rating: 100% (QA)

Marcus is not a qualified accountant but being a member of the audit team Marcus need to be aware of ... View the full answer