1. The Expense Recognition Principle
Case 1.1
Waste Management:
The Expense Recognition Principle
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2. Waste Management Case Relevant Technical Knowledge
Expense Recognition Principle
Costs need to be matched to the revenues that they helped to generate. A key point is that expenses should not necessarily be recognized when the work is completed or a product is produced. Rather, the costs should be recognized when the costs can be matched to revenue that has been recorded.

3. Waste Management Case Relevant Technical Knowledge
PCAOB AS No. 5 – Paragraph 2
“Effective internal control over financial reporting provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes.”

4. Waste Management Case Relevant Technical Knowledge
PCAOB AS No. 15 – Paragraphs 5-6
Sufficiency “is the measure of the quantity of evidence” needed. This will depend upon the risk of material misstatement and the quality of evidence obtained. The appropriateness of evidence refers to whether the evidence is both relevant and reliable “in providing support for the conclusions on which the auditor's opinion is based.”

5. Psychology Literature - How to Best Acquire Knowledge
Feature Repeated Case Experiences with Feedback; and
Teach Technical Concepts within Real-Life Contexts
Consider the following additional cases:
Waste Management: The Definition of an Asset
WorldCom: The Expense Recognition Principle
WorldCom: The Definition of an Asset

6. Epilogue – Waste Management
Arthur Andersen and WMI paid $220 million to settle shareholder suits
WMI restated earnings, which caused a $6 billion decline in the value of the company shares

7. Epilogue – Waste Management
Top WMI executives were barred from acting as directors of public companies ranging from a few years to indefinitely
Arthur Andersen partners related to the engagement were barred from auditing public companies ranging from 1 to 5 years