Transcript Due Diligence on Fast-Fashion Inventory Through Data Querying

Due Diligence on Fast-Fashion
Inventory Through Data Querying
Discussant comments
Bob Cuthbertson, CaseWare IDEA Inc.
Audit approach and lessons learned
 Key:
• Normal – in both the case and inventory audit approach
• Italics – in the case but not in inventory audit approach
• Bold – in inventory audit approach but not in the case
Audit approach and lessons learned

Existence
•
•
•
•

Review inventory count procedures
Observe the count
Verify payment
“Block check” sales based on purchases
Completeness
•
•
•
Perform cut-off tests
Verify inclusion of all purchases in inventory
Review returns policy and examine sales
records for returns volumes
Audit approach and lessons learned

Rights
•
•
•

Verify purchases of inventory
Review vendor invoices to determine title conveyed
Review sales contracts to determine right to return
merchandise
Valuation
•
•
Test costing
Test for obsolete items
•
•
•
•

Compute inventory turnover
Review markdown policy for appropriateness
Analyze sales by product line, location
Check extensions and footing; trace to GL
Presentation
•
Valuation method appropriate?
Case logic and data files
 Need sales data
Selecting the software tool
 Universe of audit software
 “Less cumbersome to use”
 Why audit software?
Selecting the software tool
 Universe of audit software
 “Less cumbersome to use”
 Why audit software?
•
•
•
•
Imports
Audit functions
Preserve data files
Readily available
Structured vs. Unstructured Testing
 Walk before running...
General
 Role of data analysis in the audit process
 Queries