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Part 3 : Find below information about a hypothetical audit client named Little Store, Inc. You have been assigned the task of auditing Little Stores

Part 3: Find below information about a hypothetical audit client named Little Store, Inc. You have been assigned the task of auditing Little Stores Sales account for occurrence and completeness. You will be using substantive analytical procedures to test these assertions.

  • Use the information about Little Store to develop expectations regarding Sales at the individual store level (i.e., disaggregated level).
  • You will complete three sets of analytical procedures: 1 for each of the three main methods (trend, ratio, and reasonableness test). In each case, compare your expectations to the actual numbers and identify the stores with a material discrepancy.
  • Use MS Excel to complete your analyses, highlighting material discrepancies in modest colors. Suggestion: Start by importing the table in the case to an Excel file.
  • Submit your EXCEL file containing all of Part 3 to the Canvas Project 2 Assignment.

____________________________________________________________________________________

Little Store, Inc. has eighteen convenience stores located in Oklahoma. Little Store has not opened any new stores for two years, but plans to open at least one during each of the next three years. Operations in the current stores seem to be relatively stable over the past few years, however, they do vary by demographic location and the mix of products sold.

The location of a store is based on several factors, such as competition and the economic environment of the location. Stores 1, 4, 6, 7, 8, 11, 13, 14, 16, 17, and 18 are considered to be in favorable locations.

Typically, a stores operations do not change much unless a new product line is introduced, such as selling gasoline, offering check-cashing services, or selling lottery tickets. The mix of products and services can vary, with the most important factor historically being whether the store sells gasoline. Stores 3, 4, 5, 6, 10, 11, 12, 13, 14, 15, 16, and 17 sell gasoline. These additional product lines typically affect the volume of customers as well as the number of full-time employees.

Additional factors to consider:

  1. According to the National Association of Convenience Stores (NACS), industry sales should average about $490 per square foot this year.

  1. Little Store outlets follow two basic floor plans. Stores 1, 2, 8, 9, and 18 have 2,500 square feet of room, while stores 3, 4, 5, 6, 7, 10, 11, 12, 13, 14, 15, 16, and 17 have 4,000 square feet of room.

  1. In prior years, stores that sold gasoline had an average gross profit percentage of 30.1%, while stores that did not sell gasoline had an average gross profit percentage of only 22.1%. The average for all stores was 28.2%. Cost of Sales has already been audited this year as part of the audit of Inventory.

Store

Number

Sales

2018

(unaudited)

Cost of Sales

2018

(audited)

Sales

2017

Avg. Inventory

2018

Avg.

2018

Employees

1

1,146,438

888,701

1,165,221

44,171

11.31

2

1,195,004

911,655

1,147,430

45,714

12.46

3

1,981,409

1,398,296

2,037,463

45,826

10.06

4

2,300,671

1,503,717

2,257,920

53,862

11.1

5

1,956,481

1,400,118

1,850,354

49,883

10.71

6

1,799,713

1,266,050

1,916,884

47,016

7.5

7

1,820,641

1,418,278

1,833,209

59,726

14

8

1,159,004

905,618

980,484

37,664

11.6

9

1,139,475

756,449

1,069,652

34,662

12.7

10

1,984,777

1,354,951

1,795,123

38,774

12.2

11

2,293,847

1,657,822

2,119,015

55,423

11.1

12

1,984,722

1,366,050

1,947,303

52,884

10.4

13

1,798,336

1,280,773

1,705,789

46,834

8.84

14

2,484,503

1,600,852

2,396,971

53,772

12.1

15

1,837,400

1,322,089

1,901,631

43,982

9.7

16

1,609,385

1,194,814

1,514,798

44,893

7.2

17

1,874,229

1,311,975

1,886,587

37,665

10.5

18

1,198,229

908,911

1,092,908

44,857

10.9

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