Due Diligence on Fast-Fashion Inventory Through Data Querying
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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
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Review inventory count procedures
Observe the count
Verify payment
“Block check” sales based on purchases
Completeness
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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
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Verify purchases of inventory
Review vendor invoices to determine title conveyed
Review sales contracts to determine right to return
merchandise
Valuation
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Test costing
Test for obsolete items
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Compute inventory turnover
Review markdown policy for appropriateness
Analyze sales by product line, location
Check extensions and footing; trace to GL
Presentation
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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?
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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