Briefly summarize the steps necessary to audit the revenue cycle. Please incorpo

Question

Briefly summarize the steps necessary to audit the revenue cycle. Please incorporate the audit risk model in your response.  

Bernard L. Madoff: The Fraud of the Century Bernard L. Madoff: The Fraud of the Cen On December 11, 2008, Bernie Madoff was arrested on one count of securities came one day after Madoff admitted to his fraud The arrest two sons that his entire investment advisory busine was just one big Ponzi scheme. In the early part of 2009, Madoff pled guilty to 11 counts i did perjury, and money laundering. As a result, Madoff was sentenced to 150 years in pronHw of fraud Madoff defraud investors out of as much as $65 billion? This case provide Madoff was able to commit the Fraud of the Century. s an overvie PONZI SCHEME A Ponzi scheme is any fraudulent investment plar investor's own principal or principal paid by future investors, not from legitimate investment returns To carry out his plan, Bernie Madoff represented to clients and potential clients that he used an inno- vative "split-strike conversion strategy" to invest their money. In so doing, he claimed to invest thenr money in "shares of common stock, options and other securities of well-known corporations, an upon request, would return to them their profits and principal."2 In fact, Madoff never invested the funds in the securities that had been promised. Rather, the funds were deposited into a bank account at Chase Manhattan Bank, based in New York City. If clients requested to receive "profits earned or redeem their investment principal, Madoff merely used the money in the bank account at Chase Manhattan Bank that had belonged to either that client or other clients to pay off the requested sum that pays its returns to an investor from either that SPLIT-STRIKE CONVERSION STRATEGY Madoff created Madoff Investme installing refrigeration systems and working as a lifeguard. By the late nt Securities in the 1960s with $5,000 that he had earned from 80s, Madoff had hired number of family members and had earned a sterling reputation on Wall Street. By the early 0s, Madoff began to receive investment commitments from key institutional investors. While he did not promise specific rates of return to clients, Madoff knew that the investors expected that their investment would perform at a level higher than the market average. To meet their expecta tions, Madoff claimed to have mastered a "split-strike conversion strategy." Under his split-strike conversion strategy, Madoff promised clients and prospective clients that their funds would be invested in a "basket of stocks that would closely mimic the price movements of the Standard & Poor's 100 Index." He further promised to "opportunistically time these purchases and would be out of the market intermittently, investing client funds during these periods in United d States Treasury bills." Madoff also promised o hedge the investments in common stocks "by using client funds to buy and sell option contracts hose stocks, thereby limiting potential client losses caused by unpredictable changes in States Government-issued securities such as Unit lated to t stock prices." Madoff, in reality, never made the investments that he promised to clients S To help conceal the Ponzi scheme from investors, Madoff created "false trading confirma- s and client account statements that reflected the bogus transactions and positions" and then estment clients. According to Madoff, "The clients receiving trade ing by reviewing these documents that I had never and account statements had no engaged in the transactions repres nted on the statements and confirmati ns SECURITIES AND EXCHANGE COMMISSION stingly, between June 1992 and December 2008, the SEC received several complaint ing Madoff s hedge fund, including those from Harry Markopolos, a portfolio manager at Ram part This case contains excerpts from three different cases published b of this textbook's authors, Jay Thibodeau (with Deborah Freier McGraw-Hill Education and written by one ission to excerpt this material was granted bore lay Thibodeau The complete version of each case can

Explanation / Answer

Steps required to audit the revenue cycle are :

1. First identify whether the customer is ready for accepting the Deal.

2. Check whether returns for investment are made thorugh returns received.

3. Check whether proper returns are available and entire returns are given to the clients as decided.

4. Returns are actually given to the clients.

5. Proper documentation of the same has been done

6.Proper investment have been received from the clients and proper recording has been done for the same

7. Recognising effect of this process on other related accounts

Performing risk assessment procedures in the revenue cycle

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.