Question
ASSIGNMENT IDEA 10 CI202 IDEA Data Analysis Workbook: https://www.dropbox.com/s/dl64xm1l6no3uk8/Workbook%20v10.zip?dl=0 You are a Staff Auditor at Showker & Associates LLP. A long-time client, Home Improvement Inc.
ASSIGNMENT
IDEA 10 CI202 IDEA Data Analysis Workbook: https://www.dropbox.com/s/dl64xm1l6no3uk8/Workbook%20v10.zip?dl=0
You are a Staff Auditor at Showker & Associates LLP. A long-time client, Home Improvement Inc. has
asked your firm to come and investigate a possible fraud. Management has noticed a disproportionate
increase in Cost of Goods Sold in the first quarter of the current year (2017), and has recently been
notified through an anonymous tip that a purchasing fraud has taken place at the company. Home
Improvement Inc. is a retailer in Harrisonburg, Virginia that sells approximately 24 home improvement
products including cabinets, light fixtures, faucets and more. The company buys primarily from local
vendors and sells its products locally. The company currently sells products offered by 200 vendors and
has 80 full-time employees.
Management at Home Improvement Inc. is concerned that an employee has taken advantage of the lack
of internal controls over the Accounts Payable function and has committed a fraud. Showker &
Associates conducted the annual audit of the company several months prior for the year ended
December 31, 2016 and found no trace of fraud. However, the firm did note that there was a lack of
internal controls over vendor purchases and payments, and relayed their concern to the company's
management.
Your firm will be conducting a fraud investigation based on transactions that occurred during the first
quarter of the current year. Therefore the primary focus of the investigation will be on purchases made
from January 1, 2017 to March 31, 2017. Purchases and payment fraud are among the most common
types of fraud in an organization. The audit team has decided to use IDEA to analyze the company's data
and investigate this possible fraud.
ADDITIONAL NOTES
It is important to understand the possible ways in which this type of fraud could occur. It has already
been mentioned that there is a lack of internal controls over the Accounts Payable function at Home
Improvement Inc. With that in mind, it is important to think about what could go wrong at the company
to help determine where to look for the fraud.
Potential Risks in Accounts Payable:
1. Payments made to unauthorized suppliers.
2. Payments made to individuals or employees.
3. Unauthorized premiums given to suppliers.
4. Invoices paid late.
5. Invoices paid on irregular dates.
6. Invoices processed twice.
7. Payments made in a way to go undetected by auditors.
8. Missing Purchase Order or other items / documents.
INSTRUCTIONS
As the staff auditor, your senior has assigned you with the task of analyzing the employees, vendors and
purchases listings to check for fraud. These listings are updated through the end of the first quarter of
the current year and contain all of the necessary information to conduct the investigation.
You are to go through the following steps to complete the investigation. It is important that you are
thorough and complete in your work. Throughout the assignment you must take screen captures of each
step and paste them to a Word document to be turned in at completion. This will allow your senior to
easily follow your work and evaluate your performance.
The following Microsoft Excel data files are provided for this case:
Employees.xls
Vendors.xls
Purchases.xls
1. Open the IDEA software and open a new project name Home Improvement Inc. Give the project
the title Fraud Investigation. Change the Project properties to contain the proper Report name
and Report period.
2. Import the three excel files provided for this case into your newly created project in IDEA. Check
the field statistics of each data set individually to verify that all of the data was imported
correctly. From the Field Statistics, the Total Amount column in the purchases listing should
equal $188,552.00.
- The excel file titled Employees contains a detailed list of every employee at Home Improvement Inc.
- The excel file titled Vendors contains a detailed list of every vendor that is in the company's accounts
payable system. These vendors have been approved by the Purchasing department and are paid when
ordered items have been received by Home Improvement Inc.
- The excel file titled Purchases contains a listing of all the purchases made from Home Improvement
Inc. during the first quarter of 2017. Products are purchased from Home Improvement's vendors to be
sold by the company.
Once uploaded into the project, these three data sets will be used to search for any unusual,
missing or duplicate information.
3. From the Vendors listing, extract any rows that contain a P.O. Box as the listed billing address
and analyze the results for any unusual items.
4. Test for any gaps or duplicates in the purchase order number sequence on the Purchases listing.
Additionally, test for any duplicate invoices.
5. According to the company's policy, it is only acceptable to avoid credit approval on small
purchases below $200. Ensure that no amounts of $200 or greater were purchased without the
proper approval. From the First Quarter Purchases listing, extract all purchases above the
threshold that were made without credit approval.
6. Run a Stratification on the Total Amount field in the First Quarter Purchases database and
analyze the results. Extract any items you consider to be high or unusual payments as a result of
your Stratification analysis.
7. Run a Direct Extraction to check for any orders received or payments made on unusual dates
(weekends) from the Purchases listing.
8. Ensure that all purchases have been made from vendors contained on the Authorized Vendors
listing.
9. No employees' information should be present within the approved vendor listing. Join the two
databases to search for any possible matches. Analyze any duplicate data more closely and then
extract any additional information as necessary.
10. Run a Summarization of the First Quarter Purchases containing all of the purchases information
and order the results alphabetically by vendor name. Run a Benford's Law analysis on the first
digit and first two digits of the Total Amount column from the listing.
11. Provide an audit trail for your supervisor by taking a screen capture of your File Explorer
showing all of the project databases and reports that were created during the investigation and
screen captures of the expanded history of your work on the project.
12. Make recommendations to the client on ways to improve their internal controls over the
Accounts Payable function in order to prevent this type of fraud from occurring again in the
future. Your recommendations should be based on your fraud investigation findings and each
issue discovered should be addressed with a resolution.
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