Research and discuss the main audit procedures related to a client’s revenue balances, including the concept of multiple deliverables and the SAB 101 publication from SEC. Solution Main audit procedures related to a client’s revenue balances As per Generally accepted accounting principles (GAAP), auditing revenue is a two-part process: Sample and test the income statement revenue accounts Sample and test the balance sheet account: accounts receivable Here are some of the accounts receivable audit procedures that they may follow: The preceding list of audit procedures is designed to detect a variety of audit risks, which include the following: SEC Staff Accounting Bulletin: No. 101 – Revenue Recognition in Financial Statements This staff accounting bulletin summarizes certain of the staff\'s views in applying generally accepted accounting principles to revenue recognition in financial statements. The staff is providing this guidance due, in part, to the large number of revenue recognition issues that registrants encounter. Accounting for multiple-deliverable revenue arrangements Vendors often provide multiple products or services to their customers as part of a single arrangement or a series of related arrangements. These deliverables may be provided at different points in time or over different time periods. As a simple example, a vendor may enter into an arrangement with a customer to deliver and install a tangible product along with providing one year of maintenance services. In this arrangement, there are three deliverables: (1) the product, (2) installation and (3) maintenance services. Issues often arise regarding how and whether to separate these deliverables and how to allocate the overall arrangement consideration. Subtopic 605-25, Revenue Recognition – Multiple-Element Arrangements, of the Financial Accounting Standards Board’s Accounting Standards Codification (ASC) provides the guidance that should be followed in accounting for this and many other revenue arrangements with multiple deliverables..

1. Research and discuss the main audit procedures related to a client’s revenue balances, including
the concept of multiple deliverables and the SAB 101 publication from SEC.
Solution
Main audit procedures related to a client’s revenue balances
As per Generally accepted accounting principles (GAAP), auditing revenue is a two-part
process:
Sample and test the income statement revenue accounts
Sample and test the balance sheet account: accounts receivable
Here are some of the accounts receivable audit procedures that they may follow:
The preceding list of audit procedures is designed to detect a variety of audit risks, which include
the following:
SEC Staff Accounting Bulletin:
No. 101 – Revenue Recognition
in Financial Statements
This staff accounting bulletin summarizes certain of the staff's views in applying generally
accepted accounting principles to revenue recognition in financial statements. The staff is
providing this guidance due, in part, to the large number of revenue recognition issues that
registrants encounter.
Accounting for multiple-deliverable revenue arrangements
Vendors often provide multiple products or services to their customers as part of a single
arrangement or a series of related arrangements. These deliverables may be provided at different
points in time or over different time periods. As a simple example, a vendor may enter into an
arrangement with a customer to deliver and install a tangible product along with providing one
year of maintenance services. In this arrangement, there are three deliverables: (1) the product,
(2) installation and (3) maintenance services. Issues often arise regarding how and whether to
separate these deliverables and how to allocate the overall arrangement consideration. Subtopic
605-25, Revenue Recognition – Multiple-Element Arrangements, of the Financial Accounting
Standards Board’s Accounting Standards Codification (ASC) provides the guidance that should
be followed in accounting for this and many other revenue arrangements with multiple
deliverables.