The Company recognizes revenue on the percentage completion method of accounting and in accordance with ASC...

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The Company recognizes revenue on the percentage completion method of accounting and in accordance with ASC 606. A summary of the Company's work-in-process detail, as of December 31, 2022, is as follows. Contract Contract value Cost to date Estimated total cost Revenue eamed Billings Contract Asset Contract Liability ABCD 1,000,000 5,000,000 200,000 1,000,000 800,000 4,000,000 250,000 1,250,000 8,000,000 1,500,000 6,000,000 150,000 650,000 2,000,000 2,300,000 100,000 600,000 5,000,000 1,000,000 4,000,000 1,500,000 1,775,000 300,000 275,000 20,000,000 3,700,000 14,800,000 5,000,000 4,875,000 700,000 575,000 In order to approximate percentage completion for the purpose of recognizing revenue, the Company computes the ratio of cost to date divided estimated total cost. In this problem, for illustrative purposes only, each contract is assumed to be 25% complete. The percent complete is then multiplied by the contract value to get the revenue earned. Revenue earned is then compared to what the Company has billed and recognized as revenue to determine whether the Company has a Contract Asset or a Contract Liability. A Contract Asset means the Company has earned more than they have billed, and a Contract Liability means the Company has billed more than they have earned. The recorded revenue is then adjusted to what has been earned by either a debit (decrease) to revenue or a credit (increase) to revenue. Required 1. Based on the preceding, describe in detail what you believe may be the primary risk(s) that the Company's revenue could be materially misstated due to error or fraud. The Company recognizes revenue on the percentage completion method of accounting and in accordance with ASC 606. A summary of the Company's work-in-process detail, as of December 31, 2022, is as follows. Contract Contract value Cost to date Estimated total cost Revenue eamed Billings Contract Asset Contract Liability ABCD 1,000,000 5,000,000 200,000 1,000,000 800,000 4,000,000 250,000 1,250,000 8,000,000 1,500,000 6,000,000 150,000 650,000 2,000,000 2,300,000 100,000 600,000 5,000,000 1,000,000 4,000,000 1,500,000 1,775,000 300,000 275,000 20,000,000 3,700,000 14,800,000 5,000,000 4,875,000 700,000 575,000 In order to approximate percentage completion for the purpose of recognizing revenue, the Company computes the ratio of cost to date divided estimated total cost. In this problem, for illustrative purposes only, each contract is assumed to be 25% complete. The percent complete is then multiplied by the contract value to get the revenue earned. Revenue earned is then compared to what the Company has billed and recognized as revenue to determine whether the Company has a Contract Asset or a Contract Liability. A Contract Asset means the Company has earned more than they have billed, and a Contract Liability means the Company has billed more than they have earned. The recorded revenue is then adjusted to what has been earned by either a debit (decrease) to revenue or a credit (increase) to revenue. Required 1. Based on the preceding, describe in detail what you believe may be the primary risk(s) that the Company's revenue could be materially misstated due to error or fraud.

Answer rating: 100% (QA)

Based on the information provided regarding the Companys percentage completion method of accounting and the process for recognizing revenue in accorda... View the full answer