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ACC 693 Chapter 8 Quiz Note: The material contained within these pages is taken directly from your textbook, Computerized Auditing Using ACL Data Analytics. Alterations were made only for formatting and the omission of specific questions. Reference Arens, A. A., Elder, R. J., & Borsum, C. J. (2013). Computerized Auditing Using ACL Data Analytics. (3rd ed.). Okemos, MI: Armond Dalton Publishers, Inc. Assignment #1 Simpson Company: Using ACL in the Audit of the Sales and Collection Cycle - Part 2 Answer all parts of these requirements on this page through page 8-11. It is more convenient to complete the assignment if you remove pages 8-5 through 8-11 now. You are assigned to audit of the sales and collection cycle for Simpson Company that is included in three parts: Chapter 7 Part 1 - Planning the audit of the sales and collection cycle. If you have not completed this part do so before continuing with Part 2. Chapter 8 Part 2 - Tests of controls and substantive tests of transactions in the audit of sales, payments, and other cred its Chapter 9 Part 3 - Tests of the year-end balance of accounts receivable Complete the following requirements using ACL: Q 1. You are concerned that some of the amounts for each of the four transaction types may be misclassified as a negative when they should be a positive, or vice versa. First decide which transaction types should have positive amounts and which ones should have negative amounts. Then determine if there are any misclassifications. List any transactions that are misclassified. (Hints: Use a separate filter for each of the four transaction types. It is not necessary to create any new tables.) Q 2. Account for all document numbers for each of the four transaction types and list all duplicates and missing document numbers, if any. The beginning and ending document number for each type was provided by accounting and is as follows: Sales invoices Beginning 87911 Ending 88723 Payments from customers Credit memos Write-offs 64260 2614 36 64675 2734 36 Q 3. Determine if Simpson follows their established policy for the due date for payment for each sales transaction. Simpson's policy is that the due date for payment is 30, 60, or 90 days from the billing date, depending on the volume of business that the customer does with Simpson in the previous year. For customers with annual sales of less than $100,000 payment is due in 30 days, from $100,000 to $200,000 payment is due in 60 days, and over $200,000 payment is due in 90 days. You believe the 2014 sales amounts are similar to those in the previous years so you should use those amounts to determine whether the policy is being followed for each customer. Q 4. Determine if any customer's accounts receivable balance exceeds the credit limit for that customer in the master file table. List the customer number, accounts receivable balance, and credit limit for those that do. Q 5. Determine the two largest transaction a mounts for each of the four types of transactions (for transaction types with negative balances use absolute values). Identify any that are significant enough to warrant further testing by examining supporting documentation. Q 8. Because one of the tests to be performed on sales involves is considered particularly important, the in-charge asks you to determine the sample size assuming a confidence level of 95%, and an upper error limit of 6% (the expected error rate remains zero). Calculate the revised sample size and explain the result compared to your answer for Question 7. Assignment #2 Jaysberg Electric: Using ACL in the Audit of Accounts Receivable Transactions Answer all parts of these requirements on this page through page 8-23. It is more convenient to complete the assignment if you remove pages 8-15 through 8-23 now. You are responsible for performing tests of controls and substantive tests of transactions for sales and sales returns and allowances in the audit of Jaysberg Electric Co. for the year ended 12/31/14. You will be using ACL to do as many audit tests as possible. You will be using three tables already included for the Jaysberg project: Jaysberg_Auth_Prices, Jaysberg_Sales_Returns, and Jaysberg_Sales_Trans. You will also be using the table of authorized prices. The headings for each table are sufficiently descriptive for your understanding. Complete the following requirements using ACL: For each requirement include the correct answer or exception(s) that you found and other information referred to in the question. Q 1. Perform Verify and Count commands for all three tables and identify any exceptions. Q 2. Test the accuracy of the monthly postings to the general ledger. Note that the table includes a month code. Monthly sales per the general ledger are provided below. January $ 283,329.37 July $ 44,668.29 February March April May June 105,863.36 44,842.76 249.48 189,390.87 133,752.33 August September October November December 11,811.15 141,178.84 658,064.64 601,760.99 404,044.14 Q 3. Perform the following tests of controls. For each control state the command or commands that you did to test the control and the results of the test. a. Document numbers for all documents are accounted for periodically to make sure there are no duplicates or omissions. Control(s): Result(s): b. The unit cost of each product should be no more than 80% of the unit selling price. Control(s): Result(s): c. All shipments are billed within four days of the shipping date. Control(s): Result(s): d. No individual sale is to exceed $150,000. Control(s): Result(s): e. No credit memo for a sales return is more than 60 days after the sale. Control(s): Result(s): Q 4. Perform the following substantive tests of transactions. For each substantive test, state the command or commands that you did to test the amounts and the results of the test. a. Determine that there is a shipping document number for every sales invoice number. Command(s): Result(s): b. Determine the two product numbers with the largest total dollar sales for subsequent follow-up to verify the selling prices and quantities shipped. Command(s): Result(s): c. Determine the two product numbers with the largest unit selling prices for subsequent follow-up to verify the unit selling prices. Command(s): Result(s): d. Compare the authorized prices to the unit selling prices on the sales transactions list. Command(s): Result(s): Q 5. Stratify the sales transactions. Identify and list large transactions that you believe should all be verified by examining supporting documents. Command: Table: Assignment #3 Stabler Services: Using ACL in the Audit of Acquisitions Transactions Answer all parts of these requirements on this page through page 8-31. It is more convenient to complete the assignment if you remove pages 8-27 through 8-31 now. Stabler Services is a privately held services company located in Minneapolis that provides consulting services and conferences for small banks in the U.S. and Canada needing expertise in managing their banks. TM business has nine departments that are all in one location. Department 1 is the administrative department and is responsible for making sure the consulting and conference departments are able to operate effectively. Department 3 includes only part-time salespeople who travel away from Minnesota to attract new business. The other seven departments each offer a different type of service, but they each provide both consulting and conference services. Conferences are an essential part of the business because a conference fee is charged to each participant, which is a major source of revenue for Stabler. Conference information is also the primary way that departments solicit business. You are auditing acquisitions for the year ended 12/31/14 and will be using three files that are already included in ACL in the Stabler Service project as tables. The tables are as follows, with information provided by the IT department in parentheses: Stabler Acquisitions 2014 (320 records; total of invoices amounts $1,128,744.09) Stabler_Chart_of_Accounts (20 records; only for acquisition-related accounts) Stabler_ AP_Master_File (55 records) Complete the following requirements using ACL: Q 2. Use the Statistics command and list any information that appears unusual or you believe should be investigated further. Q 3. Determine if there are any missing vouchers or duplicate numbers. Q 4. Use Join or Relations to determine the account name for each chart of account number in the Stabler_Acquisitions_2014 table. Do the following using the combined table. For each one, state any concerns that you have for potential misstatements: a. Review the account names and identify any monthly expense that is likely to be the same or similar and determine if the amounts are reasonable. Account #: Concern(s): Account #: Concern(s): b. Evaluate whether the expenses charged to Department 1 are reasonable. Account #: Concern(s): c. Evaluate if an expense charged to other departments should have been charged to Department 1. Account #: Concern(s): Q 5. Review and evaluate the expenses for each department. Based on your evaluation identify any transactions you believe should be further investigated. Q 6. Determine if all vendor numbers included in the Stabler-Acquisitions-2014 table are also included in the Stabler_AP_Master_File table. Q 8. Which two vendors does Stabler do the most business with? Does this seem reasonable for the nature of their business? Assignment #4 Eastland Publications: Using ACL in the Audit of Payroll Transactions Answer all parts of these requirements on this page through page 8-37. It is more convenient to complete the assignment if you remove pages 8-35 through 8-37 now. You are assigned to the audit of salary and bonus disbursements for Eastland Publications for the quarter ended 12/31/14. Eastland is a medium-sized publisher of technical journals for a wide variety of industries. Eastland employs approximately 200 salaried professionals, and no hourly employees. Each employee works in one of six departments related to one or two industries. The company was started in 1999 by John Lawson who is still president and chairman of the boa rd. It has grown steadily since then by aggressively seeking new journals to publish and delivering quality publications on time every month. Experienced employees are well paid relative to competing companies in the industry and working conditions a re excellent, resulting in low turnover and experienced people. Starting in May 2014 the company started a new program that hi res entry level liberal arts graduates directly from colleges and universities who have the potential to develop into competent journal designers and editors. Each of these employees starts on the first day of the month and immediately begins a n extensive training program to learn the way Eastland publishes. All employees a re paid one-twelfth of their annual salary monthly, at the end of the month. Withholdings for taxes follow government requirements and vary depending on the salary level and number of dependents. Combined withholding percentages are included in the pay roll master file. In addition to the annual salary, most employees a re paid a n annual bonus in December based on a percentage of their annual salary decided by the board of directors. All employees receive the full bonus percent regardless of their start d ate, as long as they were still employed at December 31. Trainees are not eligible for a bonus. The approved bonus percent is included in the payroll master file. You are assigned to audit the salary payroll for the year ended 12/31/2014, but you will be testing only the last quarter's pay. You will be using two payroll Excel fi les that are included in the Eastland project. The payroll transaction fi le includes all salary transactions for October through December, including the annual bonus. The payroll master table includes all employees who were employed at 9/30/14 plus those who were hired during the last three months of the year. Information about the records in each table was provided by the IT department and is included with the description of the files: Eastland _Payroll_Trans file (753 records; $4,928,955.56 Gross Pay) Eastland Payroll Master file (200 records; $12,127,375 Salary) - Complete the following requirements using ACL: Q 1. Determine that the record count and totals for the two tables are consistent with the information provided by the IT department. Q 2. Determine that all employees on the Eastland- Payroll- Trans table are included in the Eastland Payroll Master table. Q 3. Determine that employees hired on November 1 and December 1 were paid only for the months they were employed. Q 4. Compare the monthly salary for each month on the payroll transaction table with information in the payroll master table. Q 5. Determine if the December bonus payment for each employee is consistent with the policy established by the board of directors. Employees who earn less than $40,000 are trainees and do not receive a bonus. Q 7. Account for all check numbers issued during the period including both missing check numbers and duplicates. The first check number issued in October was 65785 and the last one issued was 67537. Q 8. Compare total salaries, not including the December bonus, for each department and assess whether the amounts appear reasonable. CHAPTER 7 Question 1 Question 2 Question 3 Q4. Determine whether the record counts in the three tables are consistent with the information you received from the IT department. Under sales transactions and related credits, it is said to have 1249 records, whereas the database indicates that there are 1349 records. There is a discrepancy of 100 for this account. Under the master file of accounts receivables, IT indicates there are 64 which aligns with what is given in the database. Cutoff tests is said to have 45 records but the database has 47 records. Q5. Determine if the amounts for each of the four transaction types are consistent with the Information you received from the IT department. With the use of filters for each individual transaction type (e.g., TYPE=\"IN\"), we are able to the Total Command to sum the appropriate amounts for each. Sales Invoice, payments and write offs Outputs the same amount as obtained by the IT Department. Credit Memos outputs $191,385.22, which is $10,108.87 more than what is indicated by IT. Q6. Determine whether there are any transactions types other than the four included in the Introduction to the case. List the exceptions, if any, and describe the likely cause of the exception. Exceptions: There is one transaction type (IY) that is not like the other four. Causes: It is possible that an employee inputted this transaction in the wrong type, as IY as Opposed to IN when creating the invoice. A separate transaction was created when it could Not be found under sales invoices. They have the same amount of another entry with the Document number I88496, meaning it is possible that this mistake was amended but not deleted. Q7. Determine the customer name for any customer records you identified with the unusual transaction type. Even though customer names are not included in the sales transactions table, this table can be related to the Simpson master file table, which does include names. According to the Master file the customer name Bully Industries. We referred to the customer Number, 262001, in the sales transaction table to the master file, giving us the name of the company. Q8. Determine the 12/31/14 balance in accounts receivable for each customer. Total the accounts and compare it to the general ledger balance of $481,900.19. By using the summarize command and included the customer number and amount, we were able to total the amounts which is $441,818.32, which is different than the general ledger balance amount by $40,081.87. Q9 Q10 CHAPTER 8 Q1. You are concerned that some of the amounts for each of the four transaction types may be misclassified as a negative when they should be positive, or vice versa. First decide which transaction types should have positive amounts and which ones should have negative amounts. Then determine if there are any misclassifications. List any transactions that are misclassified. Sales Invoice (Type = \"IN\" and AMT 0): Payment is a negative number Write offs (Type= \"WO\" and AMT>0): Write off should a negative number Credit Memos (Type= \"CM\" and AMT>0): Credit memo should be a negative number We set the filter to find any misclassified numbers associated with each transaction type. We did not find any discrepancies or misclassified amounts Q2. Account for all document numbers for each of the four transaction types and list all duplicated and missing document numbers, if any. The beginning and ending document number for each type was provided by accounting. Missing: Filter by transaction, analysis look for gaps (list missing item) Sales Invoices: No duplicates (Note: IY I88496 does have a duplicate document number to an IN entry), no missing documents Payments from Customers: No duplicates, no missing documents (Since ending is P64675to P68240 P68240to P88724 may be mislabeled) Credit Memos: No duplicates, missing C2614 Write offs: All duplicate, none missing Q3. Determine if Simpson follows their established policy for the due date for payment for each sales transaction. Simpson's policy is that the due date for payment is 30, 60 or 90 days from the billing date, depending on the volume of business that the customer does with Simpson in the previous year. For customer with annual sales of less than $100,000 payment is due in 30 days, from $100,000 to $200,000 payment is due in 60 days, and over $200,000 payment is due in 90 days. First, we created a table to summarize sales invoice amounts by customer numbers. Then, we created a sales invoice table with proper relations to others that includes customer name, Customer number, day of transaction, payment due date, and total sales amount by customer. A series of filters were created then combined to make policy violating transactions to appear. The result indicated that the policy was not correctly applied for Second Power Corp. It has total sales amount of $124,245.62 but was given only 30 days (or less) to pay Q4. Determine if any customer's accounts receivable balance exceeds the credit limit for that customer in the master file table. List the customer number, accounts receivable balance and credit limit for those that do. A credit limit column from the Master file was added to the table created earlier consisting of Customer name and accounts receivable balances. From there, a filter was created to display only the records where the accounts receivable balance is larger than credit limit. 2 records appeared as result. First, Cheer son Media's accounts receivable balance exceeded the credit limit by $3,033.69. Secondly, a record of an accounts receivable in the amount of $1,804.98 of a customer with customer number not on the master list. Q5. Determine the two largest transaction amounts for each of the four types of transaction. Identify any that are significant enough to warrant further testing by examining supporting documentation. We set the filter to display only one type of transactions. Then, we sort descending or ascending the transactions based on the transaction amount. The invoice for customer 501657 from the list above has higher than usual transaction amount (more than double the next highest). It may require further testing. A credit memo of $10,000 was recorded without customer number. Further testing on this item may be required. Q8. Because One of the tests to be performed on sales involves is considered particularly important, the in charge asks you to determine the sample size assuming a confidence level of 95% and an upper error limit if 6%. Calculate the revised sample size and explain the result compared to your answer in Q7. Sample size 50, since our confidence level is higher and error limit is lower, we must take a larger sample size. CHAPTER 9 Q1 Q2 Q3. The master file table of accounts receivable is considered a reliable resource of validcustomers. Determine if all customers in the accounts receivable balance table are also included in the master file table of accounts receivable. We created a new table with customer number from sales transactions table and customer name from the master file. We were able to identify that customer number 535189 has no name and is not listed on the master file. Q4. Simpson has general policy of providing a credit limit of $15,000 except for customers with excellent credit ratings and a long history of doing a large amount of business with Simpson annually. Approved credit limits for each customer are included in the accounts receivable master file. List the customer number, customer name, credit limit and outstanding accounts receivable balance for any customer with a credit limit greater than $15,000. We used the list we created earlier that includes the accounts receivable balance and we added the credit limit column. We set the filtered based on credit limit over $15,000 and it resulted in the following list. Q5. Generate a list of customers with a receivable balance greater than $10000 and that exceeds75% of their credit limit. Print this list, including customer number, customer name, balance and credit limit. What is the likely purpose of this procedure? Continuing with the table in Q4, we added a filter with expression \"AMT > 10000 AND (AMT / Simpson_Industries_Master.AMOUNT) > .75\" which displays the accounts with balance outstanding above $10,000 and the balance outstanding to credit limit ratio above 75%. We do this to see which customers are approaching their credit limit Q6. The balance for one of these customers exceeds the credit limit. Evaluate whether this customer is a significant credit risk. Cheerson Media exceeds their credit limit of $15,000 by $3,033.69. Looking at their transaction history, they do make quite a few transactions including regular payments. This may be an indicator to increase their credit limit. Q7. Accounts Receivable balances greater than $50,000 are key items and will be tested separately. Determine the sample size and sampling interval for a monetary unit sample of the remaining positive balances assuming a 90% confidence level, tolerable misstatement of $50,000, and no expected errors. Sample Size: 0Interval: 21645.02 Q8. Q10. The client has provided you with a sales cutoff file, which is a summary of shipments immediately before and after year end. You will observe in that file that shipping personnel do not consistently issue shipping documents in the order they were shipped. Perform sales cutoff tests for the year ended 12/31/14 to determine that all shipping documents before year end are properly included as sales transactions for 2014 and shipments are after year end are excluded from 2014 sales transactions. We created a new table by performing a right outer join of the Sales Transactions table (primary table) and the Cutoff table (secondary table). The table indicated that there were 4 transactions listed before the cutoff of 12/31/2014 with actual ship dates after the cutoff. The table created above also revealed that there were 4 shipments shipped before the cutoff (12/31/2014) but with no corresponding transaction recorded in the Sales Transactions table. Q11. Based on the results of your shipping cutoff tests, indicate what tests, if any you would perform on the transaction file. In the table that indicates a ship date but no date of transaction we may consider testing whether there was a recording error where this is an incorrect entry and there is an amended entry that records both date of transaction and ship date elsewhere with the customers listed