Urgent Medical Device, Inc. Case Study Solution
Total Number of Valid Sales:
The total number of valid sales that comprise the total sales revenue of 84,867,855 dollars are 1,063 invoices that are shown in the trial balance for the financial year end 2017.
Total Number of Unpaid Invoices:
The total number of invoices that comprise the total gross accounts receivable balance of 11,988,886 dollars are 106 invoices that are shown in the trial balance for the financial year end 2017.
Three Way Match:
By using the IDEA Data Analytical Tool and the minimum and maximum value of Sub Total of sales from field statistics; it has been concluded that the results produced by using the Tableau visualization three way match is same as the results produced through IDEA Data Analytical Tool.
The same results from both analytical tools has increased the assurance related to the data accuracy for the sales order data base. This is because of the availability of same information in all data bases which has increased the accuracy and validity of data provided by the client.
Sales Exception with out a Credit Limit:
After the detailed analysis of sales revenue file in IDEA Data Analytical Tool, it has been observed that the sales were not made to the distributors without establishing the credit limit for credit sales. While there are some exceptions related to more sales by comparing to its credit limit. For this, the additional testing should be the third party verification and cross checking of the amount along with the detailed reading of covenants with the company’s distributors.
Accounts Receivable Aging:
Based on the analysis, the sales order IDs and the invoice date provided by the client have not been matched with the data base that the auditors had received. In short, the client’s account receivables aging calculations are not the same with the auditor analysis in the IDEA Data Analytical Tool.
Allowances for Doubtful Accounts:
The allowances for doubtful accounts that have been recorded by the client at his un audited trial balance account “allowances for doubtful accounts” have not provided the sufficient and appropriate audit evidences to support the conclusion that the calculations and amounts are free from all the risks of material misstatements. The additional testing should be the recalculation of all doubtful accounts and aging through vouching, and third party verification and confirmation.
Additional Substantive Testing:
According to the findings of the risk of material misstatements that the revenue would be overstated to raise the additional capital and to show the good financial growth in future, the additional substantive testing must be the completeness of the transaction that the invoices had been sent or not along with the rights and obligations and valuations of the amount that have been recorded as sales revenue.
Reduction in Risk of Material Misstatement (ROMM):
By using the additional financial assertions and substantive testing procedures, it has been concluded that the risk of material misstatement and detection risk which will lead to the audit risk would be reduced at the acceptably low level because these financial assertions and substantive testing procedures will provide the sufficient and appropriate audit evidences to determine that the financial statements are free from all risks of material misstatements (ROMM)..........
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