Internet Problem 14 1 Revenue Recogniti
AUDITING II
HOMEWORK
“Internet Problem 14-1: Revenue Recognition Fraud”
Chapter 14
Wahyunda Risa Putri 1210534008
Shabrina Alin Firstiana 1210534010
Atikah Galuh Wilandra1210534013
Lecturer : Suhernita, SE, ForeAcc, Akt.
International Class
Faculty of Economics
Andalas University
2014
INTERNET PROBLEM 14-1: REVENUE RECOGNITION FRAUD The Securities and Exchange Commission (SEC) found that Bally Total Fitness Holding Corporation, a nationwide commercial operator of fitness centers, fraudulently accounted for three types of revenues it received from members. The SEC also charged the audit firm and six partners for their roles in the accounting violations. Visit the SEC’s website (www.sec.gov) and search the link to “Litigation Releases” to locate Litigation Release 20470 issued on February 28, 2008 against Bally Total Fitness Holding Corporation to learn more about this revenue fraud.
Required:
a. Read the release and the accompanying complaint in this matter and briefly summarize the three types of alleged revenue frauds.
b. Return to the opening page on the SEC’s website and search the link for “Press Releases” to locate the December 17, 2009 announcement of the SEC’s charges against the audit firm and the six partners.
c. Read the press release and briefly summarize the SEC’s description of the nature of audit risk associated with the Bally’s audit engagement.
d. Read the complaint against the audit engagement partner, who served as the 2001 and 2002 engagement partner. What factors caused the audit firm to recognize Bally as a high risk audit client for 1996-2003?
Answer:
The following answers are based on the SEC’s Litigation Release No.
20470 and related press releases associated with the fraud at Bally Total
Fitness Holding Corporation:
a. According to the SEC press releases and Litigation Release No. 20470, Bally fraudulently accounted for three types of revenue it received from members: initiation fees, prepaid dues, and reactivation
HOMEWORK
“Internet Problem 14-1: Revenue Recognition Fraud”
Chapter 14
Wahyunda Risa Putri 1210534008
Shabrina Alin Firstiana 1210534010
Atikah Galuh Wilandra1210534013
Lecturer : Suhernita, SE, ForeAcc, Akt.
International Class
Faculty of Economics
Andalas University
2014
INTERNET PROBLEM 14-1: REVENUE RECOGNITION FRAUD The Securities and Exchange Commission (SEC) found that Bally Total Fitness Holding Corporation, a nationwide commercial operator of fitness centers, fraudulently accounted for three types of revenues it received from members. The SEC also charged the audit firm and six partners for their roles in the accounting violations. Visit the SEC’s website (www.sec.gov) and search the link to “Litigation Releases” to locate Litigation Release 20470 issued on February 28, 2008 against Bally Total Fitness Holding Corporation to learn more about this revenue fraud.
Required:
a. Read the release and the accompanying complaint in this matter and briefly summarize the three types of alleged revenue frauds.
b. Return to the opening page on the SEC’s website and search the link for “Press Releases” to locate the December 17, 2009 announcement of the SEC’s charges against the audit firm and the six partners.
c. Read the press release and briefly summarize the SEC’s description of the nature of audit risk associated with the Bally’s audit engagement.
d. Read the complaint against the audit engagement partner, who served as the 2001 and 2002 engagement partner. What factors caused the audit firm to recognize Bally as a high risk audit client for 1996-2003?
Answer:
The following answers are based on the SEC’s Litigation Release No.
20470 and related press releases associated with the fraud at Bally Total
Fitness Holding Corporation:
a. According to the SEC press releases and Litigation Release No. 20470, Bally fraudulently accounted for three types of revenue it received from members: initiation fees, prepaid dues, and reactivation