iRubric: Case 15-01 Question 3 rubric

Discussion relates procedures to identified risks of misstatement including fraud and revenue recognition complexity; considers financial statement assertions; bases analysis on general guidance from PCAOB or AICPA standards.

Identifies need to test actual accounting for various revenue steams by testing individual contracts in relation to the applicable accounting pronouncement; procedures suggest some consideration of management's assertions.

Procedures do not suggest examination of individual contracts or confirmation with individual customers; procedures do not appear to have been developed in relation to the revenue recognition or fraud risk issues raised in addressing the first two questions.

Discussion considers specific factors related to the network and hosting arrangements including testing of contract extensions, upfront fees, sales bonuses, and cutoff for amendments; explicitly recognizes need to confirm contract details with customers; procedures address accounting for multiple element arrangements.

Tests capture typical audit procedures such as confirmations with customers, analytical procedures, re-performance and tests of revenue timing; discussion incorporates some of the issues related to revenue recognition and risk of fraud.

Procedures are generic and do not fully address or give evidence of consideration of the facts in the case; there is limited connection to the risks related to contract extensions and/or to the revenue recognition issues previously identified