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C A S E

Mark S. Beasley · Frank A. Buckless · Steven M. Glover · Douglas F. Prawitt

L EA R N ING OB JE C T IVE S
After completing and discussing this case you should be able to
[1] Design an overall audit strategy for the revenue
cycle (i.e., select tests of controls, substantive
tests of transactions, analytical tests, and tests of
balances to be performed)
[2] Assess planned control risk for the revenue cycle
based on the tests of controls selected
[3] Assess planned detection risk for the revenue
cycle based on the substantive tests selected

INTRODUCTION
Southeast Shoe Distributor (SSD) is a closely owned business that was founded 10 years ago by
Stewart Green and Paul Williams. SSD is a distributor that purchases and sells men’s, women’s,
and children’s shoes to retail shoe stores located in small- to mid-size communities. The company’s
basic strategy is to obtain a broad selection of designer-label and name brand merchandise at low
prices and resell the merchandise to small one-location retail stores that have difficulty obtaining
reasonable quantities of designer and name brand merchandise. The company is able to keep the cost
of merchandise low by (1) selectively purchasing large blocks of production over-runs, over-orders,
mid- and late-season deliveries and last season’s stock from manufacturers and other retailers at
significant discounts, (2) sourcing in-season name-brand and branded designer merchandise directly
from factories in Brazil, Italy, and Spain, and (3) negotiating favorable prices with manufacturers
by ordering merchandise during off-peak production periods and taking delivery at one central
warehouse.
During the year, the company purchased merchandise from over 50 domestic and
international vendors, independent resellers, manufacturers and other retailers that frequently had
excess inventory. Designer and name brand footwear sold by the company during the year include
the following: Amalfi, Clarks, Dexter, Fila, Florsheim, Naturalizer, and Rockport. At the current
time, SSD has one warehouse located in Atlanta, Georgia. Last year, SSD had 123 retail shoe store
customers and had net sales of $7,311,214. Sales are strongest in the second and fourth calendar-
year quarters with the first calendar-year quarter substantially weaker than the rest.

The case was prepared by Mark S. Beasley, Ph.D. and Frank A. Buckless, Ph.D. of North Carolina State University and Steven M. Glover, Ph.D. and
Douglas F. Prawitt, Ph.D. of Brigham Young University, as a basis for class discussion. SSD is a fictitious company. All characters and names repre-
sented are fictitious; any similarity to existing companies or persons is purely coincidental.

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