CASEWARE IDEA SOFTWARE

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IDEA Case #1

Inventory and Travel Expense Reporting Fraud Audit

As part of your audit for the client, you are required to do fraud detection in the area of

inventory. Some of the things that you should consider in your investigation include making sure

that:

Inventory

• Negative inventory balances are nonexistent and that write-offs are authorized

• No inventory items have a zero book value

• There are no obsolete inventory items (this is the only item you will test in this assignment)

Travel Expenses

• Travel expenses are submitted only once

• Airfares charged are reasonable, and tickets purchased are used by the employee (not cashed in)

Audit Objective #1: To determine that inventory is properly stated, write-offs are properly

authorized, and that there are no obsolete inventory items, while identifying where (warehouse

location) any identified obsolete items are being stored.

Tests of Objective #1: These tests are to determine obsolete inventory items using the following

criteria:

• Items with a turnover ratio of less than three times per year or

• Items that have not sold in the last six months (i.e., since July 1st of the audit period).

Audit Objective #2: To determine that expense reports are submitted once, and are properly

authorized.

Tests for Objective #2: These tests help detect duplicate expenses, unmatched expenses, and

suspicious payees.

Your assignment:

• In IDEA, set your working folder to “Inventory and Travel Expense Audit—last name” and the audit date 1/1/2005 to 12/31/2005.

• Locate the two audit programs and data files.

• Complete the audit programs using IDEA. As you go, complete the Extent of Testing columns (e.g., number of records identified or quantifiable result of testing) and

Summary of Findings (notes to yourself about what you discovered).

• At the end of each audit program, write a memo the file summarizing your findings. (Hint: format for memo to file on Blackboard in Assignment 6.)

• Submit on Blackboard both completed audit programs and both memos to the file.