GROUP ASSIGNMENT PART 1&

II TECHWEAR CASE STUDY

VAP2901
OVERVIEW:

◾ This is a five-part case where you are asked to assume the role of an auditor and perform various
audit
procedures on the order-to-cash business cycle (accounts receivable and sales) for TechWear,
◾ a start-up company that manufactures and sells upper-end, high-tech sportswear.
◾ You will be develop your analytics mindset in an audit context by learning how to:
◾ Ask the right business questions
◾ Extract, transform and load relevant data (i.e., the ETL process)
◾ Apply appropriate data analytic techniques
◾ Interpret and share results with stakeholders
Order-to-cash cycle:
• walk through the order-to-cash cycle and assume a credit sale, as follows:

• How would you determine the period-end accounts receivable balance ( Which accounts affect the accounts
receivable (AR) account?

Activity Debit Credit

A $100 order is placed Accounts receivable $100 Sales $100
and fulfilled by the
product being shipped

Option A: sales return – Sales return $100 Accounts

full credit receivable
$100

Option B: payment in Cash $100 Accounts

full receivable
$100
Option C: bad debt Allowance for doubtful Accounts
write-off accounts $100 (or bad receivable
debt expense if no $100
allowance is established)
PA RT I: UNDERSTANDING THE BUSINESS

◾ Become familiar with the background of TechWear.

◾ You will be involved in the audit of the order-to-cash cycle and will start with an initial risk
assessment.
◾ What are the risk areas?
◾ Take 5 mins to read up the case. Identify accounting & auditing issues.
◾ Dataset : Analytics_mindset_case_studies_TechWear P1
◾ Inventory? Accounts Receivables? Sales?
◾ Study the initial data file from year one (2015) of TechWear’s operations.
DATASE
◾ The data file includes the following
T◾ fields:
Type: this is the type of transaction, which is either a sale (Sales) or a cash
receipt (CashReceipt).
◾ TransactionNumber: this is the transaction number (beginning with 1001).
◾ AppliedToTransaction Number: this is the sales transaction number to which a
cash receipt is
applied.
◾ CustNum: this is a unique customer number used to identify each customer.
◾ C ustName: this is the customer’s name.
◾
◾ TransactionDate: this is the date of the sale or cash receipt.
◾ Amount: this is the amount of the sale or cash receipt. Cash receipts will show a
negative amount.
◾ InvoiceDate: this is the date the sale was invoiced (billed).
◾ ShipDate: this is the date the goods were shipped.
PART I
D ATE CLEANSING & TRANSFORMATION

◾ Become familiar with your data file (Analytics_mindset_case_studies_TechWear_P1.xls).

◾ Objective : Ensure that your data is complete and accurate before performing any
analysis.
◾ Perform some basic ETL procedures on this file.
PART I
D ATE CLEANSING & TRANSFORMATION

◾ Qtn 1.The accounts receivable balance on the general ledger at December 31, 2015, is $684,491.19
◾ Qtn 2.Validate that there are no other customer names.
◾ Qtn 3.Verify that the data for all of these invoices has been captured and that there are no additional
invoices or duplicates included in the file.

◾ How do we verify that?

◾ How to show evidence of work in excel?

◾ Create different tab for different questions, label question no.
PART II DATA ANALYTIC TECHNIQUES

◾ Using the data from Part I, you are asked to

◾ Qtn1. develop an accounts receivable trial balance and
◾ Q tn 2 and 3
◾ perform some analyses to assess the collectability risk on the December 31, 2015, accounts receivable
balance.
C O M M O N QUESTIONS

◾ What is an AR trial
balance?
◾ What is a Trial Balance?
APPEN D I X
PART I DATA PREPARATION

◾ use tableau & MS Excel to perform data

validation
PART II DATA ANALYTIC TECHNIQUES
◾ 2. Display the year-to-date trend in sales and cash receipts by month for 2015 (with dollars on the y-axis
and months on the x-axis).
◾ Use a visualization to best highlight any concerns about potential collection issues.

◾ Hint :
◾ Date format by month
◾ ABS function
◾ Insert tab – pivot table – custom calculation – running total
◾ Insert pivot chart
Part II Q1:Vlookup to
• Copy column A-F to another
create AR
Listing
sheet
• the VLOOKU P function says:

• =VLOOKUP(Value you want to look up, range where you want to lookup
the value, the column number in the range containing the return value,
exact match or approximate match – indicated as 0/FALSE or 1/TRUE).

• Use F4 to lock the data range, copy paste formula for all sales listed
Part II
Q1:VLOOKUP
Part II
Q1:VLOOKUP
• Invoices that do not have cash receipts to
apply

• N/A affect summation of amount in excel, use

“IF”
Part II
Q1:VLOOKUP
• Iferror formula

• Revise “if” formula if not

familiar
Part II
Q1:VLOOKUP
•
Iferror formula

• Result will display “0” instead of

N/A
Part II
Q1:VLOOKUP
• Create a “December 31, 2015” column and compute the
balance
Part II
Q1:VLOOKUP
• Cross check total
balances
PART II DATA ANALYTIC TECHNIQUES

◾ 3. Compute the year-to-date days-sales-outstanding (DSO) ratio for each month. Show the results
numerically and with a visualization.
◾ For the latter, use a column chart, also called a vertical bar chart (with DSO as the y-axis and months as
the x-
axis), to best highlight any concerns about potential collection issues.

◾ Using answer from Q tn 2

DAYS SALES OUTSTANDING RATIO

◾ DSO =
◾ ending AR balance for the period / total sales for the period (year-to-date)) * number of days in the period
(year-
to-date)

◾ Do we have all the figures? Refer back to pivot table in qtn 2

Part II Q1: PIVOT
TABLE•Allow display of invoice listing that made up the customers’ summary
balances

• Insert/pivot table

• Select listing including the Dec balance

• Create new sheet P2Q1pivot

• Play around with the pivot table fields

• Choose customer name, transaction no as row and Dec balance as values

• Go to value settings of Dec balance and change number format

Part II Q1: PIVOT
TABLE
Part II Q1: PIVOT
TABLE
• Make sure grand total is
matched with general
ledger
PART II Q2
• Identify the data by month so that you can add the data by month  Date
format by month
• Copy dataset over to a new sheet “P2Q2Month”
• Insert a column “month” before transaction date
PART II Q2
• Insert pivot table in new
sheet
• Select entire data set
PART II Q2
• Add new column “Absolute Amount”, Insert ABS function as
shown
• Insert tab – pivot table – custom calculation – running total
• Insert tab – column chart
• Column chart
 PART II Q2
• Create aggregation by month with running total
• Create a pivot table using absolute amount and – custom calculation – running total
as
shown
PART II Q2
• Create aggregation by month with running total
• Create a pivot table using absolute amount and – custom calculation – running
total as shown
PART II Q2
• Insert Pivot chart
• Use line chart
• Growing gap between sales
and receipts over time
• Cash receipts is not keeping
up with sales
• Look at area chart (stacked)
PART II Q3
• Compute the year-to-date days-sales-outstanding (DSO) ratio for each month.
Copy
previous data as values into a new sheet “P3Q3DSO”, delete “grand total” column

• Insert new column “Accounts Receivables” as shown

• Check total
PART II Q3
• Add “Days” column and state no of days per month

• Add “Cumulative days” column with simple

formula

• Add “DSO” column with formula as shown by the

arrow

• Format number to whole number

PART II Q3
• Place the “DSO” column next to “month”
column
• Insert tab – column chart
PART II Q3
PART II Q4
P2Q2Vlookup- get the AR balances as at Dec, paste as
values
• Add column “ invoice date” from 2015data
• Custom sort “largest to smallest”
• Delete rows of “Nil” balances
• Check Dec bal total
PART II Q4
• DATE function subtract date to count the age of outstanding
amount
• Format as number or general, take away decimals
PART II Q4
• IF
function
PART II Q4
• Insert tab – pivot table – category not in order need to manual
sort
PART II Q4
• Sort the category in
order
PART II Q4
• Drag to arrange
• Drill down by customer or
transaction
PART II Q4
• Copy category titles below
data
• Copy grand total row as
shown
• Key in formula as shown
PART II Q4
• Insert tab – column
chart