A team from More & Less CPAs are auditing SportsLovers, a U.S. sporting goods manufacturer and distributor.
Question:
A team from More & Less CPAs are auditing SportsLovers, a U.S. sporting goods manufacturer and distributor. The audit team recently had a meeting to discuss how to perform the current ADA, which is designed to investigate the risk of employees stealing by shipping products to their home address. The team has already completed the first three steps of the five-step ADA process. The discussion point in the meeting was how to compare the addresses in the Employee Master File with the addresses in the Shipment List File. The relevant fields in each database are shown below.
During the meeting, the following ideas were proposed for a criterion to identify notable items:
1. E_ADD is the same as SHIP_ADD.
2. E_ZIP is the same as SHIP_ZIP.
3. The result of joining E_ADD, E_CITY, E_STATE, and E_ZIP is the same as joining SHIP_ADD, SHIP_CS, and SHIP_ZIP.
4. E_NUMS is the same as SHIP_NUMS. E_NUMS is created by joining E_ADD and E_ZIP together and then removing all letters so only the numbers remain. In a similar way, SHIP_NUMS is created by joining SHIP_ADD and SHIP_ZIP and retaining only the numbers.
Required
a. Critically analyze the advantages and disadvantages of each of the four suggestions.
b. Recommend a criterion to identify notable items and justify your choice.
c. Evaluate the risk of missing truly notable items given your recommendation in (b).
Step by Step Answer:
a Suggestion Advantages Disadvantages 1 Likely not to generate too many false positives False positives are possible because streets with the same nam...View the full answer
Auditing A Practical Approach with Data Analytics
ISBN: 978-1119401742
1st edition
Authors: Raymond N. Johnson, Laura Davis Wiley, Robyn Moroney, Fiona Campbell, Jane Hamilton
