Making Connections Case Study

Making Connections Case Study

            Social Konnections Inc (SKI) is an international company that operates a large social media website.  Its primary source of income is from the advertisement where clients display adverts on specific spaces created by the company. Advertisers pay Social Konnections Inc depending on the number of clicks, views and type of the contract signed between the parties. Social network hosting and development are some of the services that the company provide through collaboration with the corporate institutions whereby they manage public and private social media networks. ASC 605-25-25 indicates that the company needs to where to position the isolated units of accounting and make a decision on what needs to be allocated to each item of bookkeeping.

The SKI ought to choose criteria of accounting every discrete unit as per the following: the seller to have control of undelivered services, allow the direct return of delivered thing and allowing a delivered product to be sold on an independent premise.  According to the agreement that the company has signed with its clients, revenue is based mainly on snaps an advertisement gets. The customers are charged weekly according to the number of snaps and perspectives made within that period. The fact that exchange meets the criteria, the administration is not parted from this process of discrete units accounting even though income is perceived these lines. Hosting, Corporate Social Network and promotion are the source of income to SKI. The course of action criteria as stipulated by the ASC 985-605-15-5. The first criteria are to allow clients to claim the product within the time frame while the second is to give the client to run the equipment by himself or use a different seller. These standards are not realized, and incomed must be professed from management, not facilitation.

According to AS2110.65, misrepresentation is a condition that shows strain to execute extortion or a frame of mind that justifies a fraudulent activity.  The company has opened up to the world after five years since there has been a continues development of advertising strategies. Before attempting to make progress, the organization has experienced both inner and outer strain, as depicted from the outstanding successes. As a result of the SKI opening to the world, there was a need to surge the cost of the stock to increase income. A significant source of revenue comes from promoting, which is done by publicizing the client’s social groups. An alternative source of commission arises from long-term pacts signed between the customer and the company. Such additional commissions help meet income target, and they are subjected to impetus rate of extortion. To eliminate misinterpretation, the company needs to verify client’s contracts as a way of demonstrating transparency and being precise on terms of the agreement.

A programmed revenue acknowledgement outline is used in SKI to facilitate deals. Although the automation process is free of mistakes, it is important to set usage and structures of internal control. For instance, all income originating from signed deals are processed according to the client’s specifications. It is essential to differentiate if the information approval, passage and checking of precision are secluded. Moreover, from Ms Drew meeting with the commercial contract chief, the company multiplied levied commission to lengthen the span of the agreement with the facilitating clients. SKI workers may use expanded commissions for self-benefits through extortions. As stipulated in AS2110.B1, the assessor needs to know how the company uses innovative techniques to counter compelling actions such as extortion. In this case, extortion can be controlled by monitoring the quality of perspectives and the number of clicks made within a specified period.

Promoting income is depends on how the process naturally tracks publicity made on the website every day and the exhibition of the data related to the client’s agreement on the website. SKI ought to test the advertisement convenience regularly to guarantee adequate preparedness with the correct information and not extra charges to the signed agreement. There is a need to review the audit report to make changes in harmony with the current contracts without administrative confirmation (Balli, Basher, and Balli, 2010). This review needs to focus on controls made for consolidating client’s data and authorizing proclamation in into the framework. The reviewing team ought to be more cautious because there is a probability of materials misquoting within the income acknowledgement process.

An auditor needs to consider the dangers of SKI’s inward financial powers because of the level of IT use through assessment of the manager’s income acknowledgements preparations. As stated on AS2110.B4, dependence on stipulate outlines is an erroneously way of preparing to handle incorrect data or erroneously preparing data. The interior abilities of IT must be understood before preparing or evaluating the final report. The initiatives offered in Q4 by the management to lengthen the contract must be thoroughly audited. Income from these facilitating managements is recorded as throughout the contract time frame, and it may not expose a false exercise during the whole billing cycle. The inspecting group should audit all levels of business that have been overextended out for strategy implementation. Because SKI embraced contract facilitation from CC, extra safety measures must be taken on how clients renew their contracts.

Reference

Balli, H. O., Basher, S., & Balli, F. (2010). Income Smoothing and the Determinants of Income Smoothing Via Foreign Asset Revenues and Foreign Liability Payments. SSRN Electronic Journal. doi: 10.2139/ssrn.1608824