Lab 1-3 Data Analytics in Auditing
The purpose of this lab is to help you identify relevant questions that may be answered using data analytics in auditing. Lees evaluate how we might use master and transaction data from an enterprise resource planning system to perform some simple data analytics to assist the financial statement audit.
Company summary
ABC Company is a large retailer that collects its order-to-cash data in a large ERP system that was recently updated to comply with the AICPA’s audit data standards. ABC Company currently collects all relevant data in the ERP system and digitizes any contracts, orders, or receipts that are completed on paper. The credit department reviews customers who request credit. Sales orders are approved by managers before being sent to the warehouse for preparation and shipment. Cash receipts are collected by a cashier and applied to a customer’s outstanding balance by an accounts receivable clerk. You have been assigned to the audit team that will perform the internal controls audit of ABC Company.
Part 1: Identify the Questions
Your audit learn has been tasked with identifying potential internal control weaknesses within the order-to-cash processes
1. Create a new word processing document and name the file “Lab 1-3 Data Analytics in Auditing Lab — [Your Page 34 name] [Your email address].” 2. Use what you know about internal controls over the order-to-cash process (or search the web if you need a refresher) to identify three different questions that might indicate internal control weakness. For example, if you suspect that a manager may be delaying approval of shipments sent to customers, your question might be “Are any shipping managers approving shipments more than 2 days after they are received?’ Type your three questions in your document. 3. Next to each question generate a hypothetical answer to each question to help you identify what your expected output would be. You may use some insight or intuition or search the Internet for ideas on how to inform your hypothesis. For example: “Hypothesis: Only 1 or 2 shipping managers are approving shipments more than 2 days after they are received.” 4. Finally, identify the data that you would need to answer each of your questions. For example, to determine the timing of approval and who is involved, you might need the approver id, the order date, and the approval date. Add your required data sources to each question in your document. 5. Save your document.
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