Your assignment
Role: Revenue-accounting manager deciding which year-end transactions require escalation before the books close
Deliverable: A year-end revenue-escalation memo with a claim table, timing diagrams, red-flag analysis, evidence requests, and targeted close controls.
Evidence basis: public records
Evaluation criteria
- transaction and timing analysis (30%): Separates order, billing, delivery, custody, acceptance, collectibility, cash, and return rights and traces the periods affected.
- source and claim status (20%): Uses the settled order accurately and distinguishes its findings and respondents from generalized claims about all bill-and-hold sales.
- incentive and reserve reasoning (25%): Analyzes reserve changes and sales incentives as evidence questions without treating a target miss as proof of misconduct.
- close control design (25%): Specifies contract, shipping, confirmation, post-close, reserve-rollforward, and override controls responsive to the risks.
Your role and decision
Days before year-end, sales personnel propose recording revenue for goods that will remain in company warehouses until customers request shipment. At the same time, management proposes releasing reserves because recent reported results are below target. You must decide what should be booked, deferred, or escalated.
Evidence packet
Use the SEC's settled administrative order concerning Sunbeam. Identify the specific practices and periods addressed. A settled order is stronger evidence than an unresolved allegation, but it still must not be generalized beyond its respondents and facts.
Required work
- Build a timeline separating order, contract terms, billing, physical delivery, custody, customer acceptance, return rights, payment, and cash.
- Explain why billing and accounts receivable do not by themselves establish revenue. List evidence needed for each unusual year-end arrangement.
- Draw the current- and next-period effects of premature recognition. Add a reserve rollforward showing how an unsupported release can affect both periods.
- Design escalation triggers and close controls, including external confirmation terms, shipment cut-off, post-close returns, reserve governance, unusual manual entries, and management override.
Constraints
Do not state that every bill-and-hold transaction is invalid. Do not equate a favorable reserve change with fraud without evidence about obligation, method, facts, process, and intent. Keep your recommendation tied to the reporting date.
Evaluation
The best memo is chronological and evidential: it shows exactly which event or condition is missing, how timing changes the statements, and how the close process can surface the risk.