Question

In testing controls, the auditor can obtain evidence from the client’s information system and analyze it in a tabular or visual form. Your client has controls in place regarding credit limits for customers. The client’s software has the capability to compare a customer’s outstanding receivable balance, plus the anticipated sale, with the customer’s credit limit in the approved customer master file. Credit limits vary by customer. For a sale to be made that will cause the customer to exceed the established credit limit, special authorization must be granted by the credit department. The table titled “Missing Credit Checks” is a list of customer numbers for customers who did not have authorization to exceed the established credit limit. The visualization titled “Credit Limit Compared to Total Sales” is the difference between the invoices for the month and the customer’s credit limit.

This control seems to fail to record or flag the lack of authorization of the sale when the invoices for the month exceed the credit limit, but it does not prevent the sale. Why do you think that the control functions this way? What would you say in your management letter to the client?

What other analysis may the auditor want to do with the invoice data in the file?

How can the client use a program like Tableau to manage control deviations?

Answer 1

No. iiWe iihave iisufficient iiappropriate iievidence iithat iithe iicontrols iiover iioccurrence iiof iirevenue iican iibe iirelied iiupon iibecause iia ii.66% iideviation iirate iiwould iibe iibelow iiour iitolerable iideviation iirate.

Test iiof iicontrol ii

· The iiauditor iishould iiattempt iito iienter iian iiorder iifor iia iifictitious iicustomer iiaccount iinumber. iiThe iisystem iishould iinot iiaccept iithis iiorder.

· Obtain iia iicopy iiof iithe iicurrent iiprice iilist iiand iiagree iifor iia iisample iiof iiinvoices iithat iirelevant/current iiprices iihave iibeen iiused.

· Inspect iia iisample iiof iiorders iito iiconfirm iithat iian iiorder iiacceptance iiemail/letter iihas iibeen iigenerated..

· Visit iia iiwarehouse iiand iiobserve iithe iigoods iidispatch iiprocess iito iiassess iiwhether iiall iigoods iiare iidouble iichecked iiagainst iithe iigoods iidispatch iinote ii(GDN) iiand iithe iidispatch iilist iiprior iito iisending iiout.

Objective iiof iitest                   

· To iiensure iithat iiorders iiare iionly iiaccepted iiand iiprocessed iifor iivalid iicustomers.                                 

· To iiensure iithat iigoods iiare iionly iisold iiat iiauthorized iiprices. iiConfirm iidiscounts iiapplied iito iiinvoices iiagree iito iithe iicustomer iimaster iifile.  

· To iiensure iithat iisales iidiscounts iiare iionly iiprovided iito iivalid iicustomers.                          

· To iiensure iithat iiall iiorders iiare iirecorded iicompletely iiand iiaccurately  

· To iiensure iithat iigoods iiare iidispatched iicorrectly iito iicustomers iiand iithat iithey iiare iiof iian iiadequate iiquality.                    

· To iiensure iithat iiall iigoods iidispatched iiare iicorrectly iiinvoiced.             

· To iiensure iicompleteness iiof iiincome iifor iigoods iidispatched.       

What iiwould iiyou iisay iiin iiyour iimanagement iiletter iito iithe iiclient?     

A iimanagement iiletter iiis iian iiauditor's iiletter iiaddressed iito iithe iiclient. ii iiAn iiaudit iiis iian iiexamination iiand iiverification iiof iia iicompany's iifinancial iiand iiaccounting iirecords iiand iisupporting iidocuments iipresented iiby iia iiprofessional, iisuch iias iia iicertified iipublic iiaccountant.

At iithe iicompletion iiof iithe iiaudit iiprogram iithe iiauditors iiprovide iiManagement iiletter iiwhich iicontain iirelevant iiinformation iiabout iiaccounting iiand iimanagement iiissues iiin iithe iientity. iiThe iireview iiof iithis iiletter iiwill iihelp iithe iimanagement iito iistrengthen iiits iiinternal iicontrol iias iiit iicontains iiidentified iideficiencies iiin iithe iisystem iiin iigeneral; iimainly iithe iiavenues iiof iiinappropriate iiaccess iito iiinformation iithat iiit iito iibe iihandled iiin iia iirestricted iiway. iiThe iirecommendations iiprovide iihelpful iiinsight iiover iimany iiissues.

What iiother iianalysis iimay iithe iiauditor iiwant iito iido iiwith iithe iiinvoice iidata iiin iithe iifile?

1. Acounts iiPayable ii(AP) ii/ iiAccounts iiReceivable ii(AR)

iiGiven iithe iisheer iiamount iiof iidata iiembedded iiwithin iiAccounts iiPayable ii(AP) iiand iiAccounts iiReceivable ii(AR), iidata iianalysis iiis iiadding iithe iimost iivalue iiin iithese iiareas. iiMany iinoted iithey iiare iireviewing iidata iiwithin iithe iivendor iimaster iifile, iiwhile iiothers iimentioned iithese iispecific iiareas:

· Purchasing iito iipayment iianalysis

· Review iiof iioperating iidisbursements, iiwith iiprimary iifocus iion iiAP

· Validation iiof iipayments iito iivendors

· Analyzing iiAR iiopen iiorder iidata iifor iisystem iideficiencies iiwithin iiprocesses

· Evaluating iiAR iiaging iifiles iifor iiinternal iiand iiexternal iifinancial iireporting

· AR iitesting iiand iisearching iifor iiduplicate iipayments

2. Duplicate iiDetection

iiIf iiyou’re iilooking iifor iirecovery iidollars, iifraud, iierrors, iianomalies iior iioutliers, iiduplicate iidetection iiis iia iiproven iitechnique iiused iito iifind iithem. iiSurvey iirespondents iiindicated iivalue iiin iiuse iiof iitesting, iianalysis iiand iireview iiof iiexpenses. iiCommon iiareas iifor iiduplicate iidetection iisearches iiinclude iipayments, iiinvoices, iitransactions iiand iivendor iireturns iifor iicredit.

3. iiSampling

Sampling iiis iia iifundamental iipart iiof iiaudit iiwork, iiand iiwith iiso iimany iiways iito iisample, iithis iifrontrunner iiis iino iisurprise. iiMultiple iisurvey iirespondents iiindicated iithey iiuse iiIDEA’s iistatistical iisampling iimethods iifor iitheir iisampling iiwork iito iiset iithe iiscope, iiproviding iidefensible iiand iivaluable iiinsights iiwhen iiresults iiare iiextrapolated iiagainst iithe iipopulation. iiOne iiinternal iiauditor iinoted iithey iiuse iithe iistatistical iifunctions, iisummarizations, iiand iistratifications iito iiallow iimanagement iito iianalyze iidata iito iimake iiprojections iiand iievaluate iipast iiperformance.

4. Data iiImports/Extractions ii& iiAnalysis iiof iiLarge iiData iiSets

iiMost iiauditors iior iiaccounting iiprofessionals iiwill iitell iiyou iitheir iibiggest iichallenges iiare iiknowing iiwhere iito iiapply iidata iianalysis, iigetting iithe iidata iithey iineed iiand iiimporting iiit iiinto iian iianalysis iitool. iiMany iiresponded iithey iiwere iiusing iidata iianalysis iito iiperform iidata iiextractions, iiwhich iiwould iibe iinearly iiimpossible iifor iithem iiotherwise, iiand iiextracting iidata iibased iion iicertain iicriteria iisuch iias iiby iiname iior iicustomer iicodes. iiOne iiindividual iistated iitheir iioverall iiuse iiof iiIDEA iiand iiODBC iiinstead iiof iiMS iiquery iiand iiSQL iito iidownload, iianalyze iiand iisummarize iidata iihad iisaved iithem iihundreds iiof iihours.

5. iiContinuous iiAuditing ii& iiMonitoring

iiData iianalysis iicontinues iito iibe iiused iito iiautomate iimanual iiprocesses iiand iitesting iiby iiimplementing iicontinuous iiauditing. iiSeveral iiinternal iiauditors iiresponded iithey iivalue iithe iiability iito iidevelop iicontinuous iiaudit iiscripts iito iilook iifor iierrors iiin iiaccount iientry iiand iithe iiuse iiof iicontinuous iimonitoring iifor iitravel iiand iientertainment ii(T&E), iifinancial iistatements, iip-cards, iihuman iiresources, iiand iiaccounts iipayable.

6. iiFraud iiDetection ii& iiForensic iiAuditing

iiWhile iiyou iimay iistumble iiupon iifraud iiby iisearching iifor iioutliers iior iianomalies, iimany iiauditors iiand iiaccountants iiare iiusing iidata iianalytics iitechnology iias iia iiforensic iitool iito iisearch iifor iifraud iiand iischemes. iiData iianalysis iitools iiallow iiyou iito iilook iiat iithe iidata iifrom iidifferent iiangles iito iiget iito iithe iiroot iicause iiof iifraud, iiwhich iiis iiwhat iimany iiof iiour iisurvey iirespondents iifound iimost iivaluable. iiSome iiof iithe iiways iidata iianalysis iiis iibeing iiused iito iisearch iifor iifraud iiinclude iitrend iiand iipattern iianalysis iito iilook iifor iiindications iiof iidiversion iiof iifunds iior iitheft, iibehavioral iianalysis iiand iimonitoring iiof iispending iitrends.

7. Analysis iiof iiP-Cards

iiProcurement iior iipurchasing iicards ii(p-cards) iihave iisimplified iithe iiamount iiof iiadministrative iiwork iiorganizations iihandle iito iiprocess iismall iipurchases, iibut iialso iiincreased iirisks. iiWhile iip-card iiabuse iihas iimade iiheadlines, iiparticularly iiin iigovernment iidepartments, iithey iican iibe iimanaged iiby iiimplementing iiproper iiinternal iicontrols iito iireduce iimisuse iiand iiwaste. iiIt’s iinaturally iian iiarea iiaccountants iiand iiauditors iimust iianalyze iito iisearch iifor iievidence iiof iired iiflags, iireview iitransactions iiand iitrack iitrends.

8. Payroll ii& iiTime iiSheets

iiHunting iifor iighost iiemployees, iifalsifying iiwage iiclaims iiand iitampering iiwith iitimesheets iiare iiall iikey iiareas iiwhere iidata iianalysis iiis iiadding iivalue, iiaccording iito iithose iisurveyed. iiOne iirespondent iiindicated iithey iiconduct ii“payroll iiweekly iidollar iior iitotal iireasonableness iitesting,” iiwhile iianother iistated iithey iiuse iiIDEA iito iiperform ii30+ iianalysis iiprocedures iion iia iiquarterly iibasis iicovering iipurchase-to-pay, iirevenue, iijournal iientries iiand iipayroll. iiData iianalysis iiis iialso iibringing iivalue iiby iienabling iireview iiof iielectronic iitime iientry iirecords iifor iicompliance iiwith iiexisting iipolicies, iiprocedures iiand iilabor iiregulations.

9. iiInventory iiAudits

iiGiven iithe iimassive iisize iiof iisome iiinventories, iidata iianalysis iiis iibeing iiused iito iiconduct iiinventory iiaudits. iiIt iiis iibeing iiused iito iiidentify iipotential iior iiobsolete iiinventory, iislow-moving iiinventory, iireconciling iithe iiinventory iicount iiwith iithe iigeneral iiledger, iiand iiperforming iisampling, iivaluations, iiand iitesting iion iiinventory iidata. iiOne iiperson iisurveyed iinoted iithey iiuse iidata iianalysis iias iia iibusiness iiintelligence iitool iito iibetter iiunderstand iiboth iilong- iiand iishort-term iiinventory iirisk, iiand iianother iiindicated iithey iianalyze ii(oil iiand iigas) iiwell, iiproperty iiand iicost iicenter iidata.             

How iican iithe iiclient iiuse iia iiprogram iilike iiTableau iito iimanage iicontrol iideviations?

          What iiIs iiTableau iiSoftware?

· A iidata iiexploration iiand iivisualization iitool iifor iiactionable iiinsights

· Delivers iidrag iiand iidrop iiinteractive iidashboards iithat iisupport ii“insights iion iithe iifly.”

· Allows iiyou iito iiask iiquestions, iispot iitrends, iiand iiidentify iiopportunities

· Connects iito iiSQL iidatabases, iispreadsheets, iicloud iiapps, iiand iiflat iifiles iilike iiCSV

· Adam iiSelipsky iiis iithe iiCEO iiand iiis iiheadquartered iiin iiSeattle, iiWA, iiUS.

· The iicompany iiprovides iidesktop, iiserver, iiand iihosted iisoftware iithat iiallows iiusers iito iiconnect, iiexplore, iiand iivisualize iitheir iidata. iiThe iisoftware iihas iinative iiconnectors iithat iienable iiit iito iiquery iirelational iidatabases, iicloud iidatabases, iiflat iifiles, iiand iispreadsheets.             

Usually, iipeople iiexploring iiwill iistart iiwith iiquestions iilike ii“Is iiTableau iieasy iito iiuse” iior ii“What iidoes iieach iiTableau iilicense iicost?”.

While iiwe iitouch iion iithese iitypes iiof iiquestions, iithis iireview iiis iibased iion iia ii10 iipoint iiscorecard iithat iiprovides iian iiobjective iiframework iito iievaluate iithe iianalytics iiplatform.

· How iito iiaccess iithe iidesktop, iiserver, iior iionline iiversions

· The iiTableau iiexplorer, iiTableau iidata iiprep, iiand iiother iiadjacent iitools/features

· Creating iidashboards, iivisualizations, iireporting

· Planning iifor iidata iimanagement iiand iiarchitecture

· Access iito iia iicommunity iiof iiTableau iiconsulting iipartners iiand iitraining

· The iiconcepts iiof iiadmins, iiexplorers, iiand iiviewers iifor iicreation iior iisharing iireports

The iifinancials iiof iihow iiit iiis iibilled iiannually iiand iiscaling iicosts