Some revenue recognition issues related to the Company’s sources of revenue would be how they recognize and make their revenue to begin with. There revenue comes from two main sources one being from the simple task of purchasing advertising directly from SKI through their advertising website. SKI puts advertisements for other advertisers on their website. This makes it so that the advertisers can personally go to SKI’s website and buy the space to advertise. The amount an advertiser pays depends on the number of views the ad receives or on the number of clicks (depending on the type of advertisement defined in the underlying contract). The revenue can also be generated directly through the advertising sales team, which is where they have found …show more content…
This also makes it hard to know when the revenue can be recognized, they would need a set amount to recognize when the advertisement gets put on the website and then would need a way to record the revenue as it was received in accordance to the popularity of the advertisement or the viewing and clicking. According to FASB, revenue should be recognized when (or as) the entity satisfies a performance obligation (Revenue from Contracts with Customers). This would mean that as soon as the contract is signed and the advertisement is up that some revenue can be recognized. This also means that the revenue for the “clicks” or “views” can be recognized when they are counted to or during the weekly billing to the …show more content…
Drew needs to consider discussing with the team about fraud risk is the fact that there is no management or supervision as to what the sales managers are doing. All these managers just go around doing their own thing. They make the contracts with their client and then once the contract is entered into the system a summary is sent to the same sales manager that worked with the customer to make sure it is accurate. This is asking for trouble, you have no one double checking this one sales manager’s work. They need to make more of a buddy system of having a two or even a group of people all involved with the same contracts in order to check and make sure that every contract truly is being entered and done correctly and not just in a way that benefits the one sales manager that set up the contract with the