Revenue Recognition

As one of the largest automakers in the world, the Ford Motor Company has a number of brands in its label including but not in any way limited to the Volvo, Mazda, Land Rover, Jaguar and Ford. To supplement its revenues, the company also engages in a number of automotive related services (Gupta 2004). In this text, I concern myself with Revenue recognition, an aspect that will require special attention from an audit perspective. The various records I shall concern myself with include the financial statements, the general ledger, the accounts receivables, as well as the deferrals/ accrual.

When it comes to revenue recognition, I shall review Ford’s general ledger so as to come up with an opinion of how sales are recorded. In my undertaking of the revenue recognition audit, the key areas I shall concern myself with include payment methods, delivery dates as well as any other information regarding the units as parts sold. Here, I shall select transaction samples which shall, enable me to review the given details.During the audit, I shall also utilize Ford’s revenue recognition policies and procedures or accounting manual. Further, I shall go ahead to ascertain that the general ledger revenue information is identical to what we have in the sales invoices.

It is important to note that the revenue recognition auditing is extremely important as Ford may be tempted to boost its sales figure, which as of 2009 according to the Ford Motor Company/2009 Annual Report (2009) stood at $118308 million, by having subsequent or previous accounting periods information included in the financial statement. Hence in this regard, I shall have to match the general ledger figures with those in the income statement so as to identify any variation. According to Eilifsen et al. (2010), revenue recognition auditing is critical as stakeholders (external) depend on this information to make objective decisions.

References

Eilifsen, A., Messier Jr. W. F., Glover, S. M., & Prawitt D.F. (2010) Auditing &

Assurance Services, Second international edition. McGraw-Hill Education

Ford Motor Company/2009 Annual Report (2009). Retrieved on 14th Feb 2011

From; http://www.annualreports.com/HostedData/AnnualReports/PDFArchive/f2009.pdf

Gupta, (2004). Contemporary Auditing. Tata McGraw-Hill

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