There is a file included in the module called Urgent Medical Devices. This includes a case. You are going to complete part of the case requirements for this assignment. At the end of the assignment, you need to complete Steps 1 (all parts) and 3 (part A o

Urgent Medical Device, Inc.: A Teaching Case Designed to Integrate Data and Analytics in the Financial Statement Auditing Classroom By Allen Blay – Florida State University Jay C. Thibodeau – Bentley University Background

Urgent Medical Device, Inc. (the Company) is a medical device company founded in 2013 in Provo, UT that specializes in the development and manufacturing of cutting edge medical devices designed for all types of joint replacement surgeries. In January 2015 the FDA approved Urgent’s premier product, a hinged titanium axle designed to provide physicians with more precise placement of joints during joint replacement surgery. In early 2016, approximately one year after the new product’s approval, the Company hired a new Senior VP (SVP) of Sales to oversee sales, physician training, product delivery, and customer service. The broad set of responsibilities allowed the charismatic SVP to significantly influence the Company’s revenue generation. The hiring of the new SVP was also done in large part to help guide the company’s development of an important new sales channel: third-party distributors that are each strategically located in close proximity to key hospitals in regions around the country. The move to hire the SVP was in direct response to overwhelming disappointment about the first year’s sales volume for the new surgical implant, which was lagging significantly behind expectations. Reports from the field had led management to recommend the new sales channel to the Board of Directors which overwhelmingly approved the new strategy, the execution of which was being led by the new SVP. Execution of Strategy To help execute the new strategy, the SVP hired five regional sales managers who would become his trusted cohorts. Together, they set aggressive sales targets for the Company’s surgical implants. The sales targets focused on achieving a growth pattern which was characterized by a record high sales volume for each successive quarter in each region. In fact, it is fair to say that the sales targets were intentionally created at almost unreachable levels to remove any questions about possible weakness in demand for the Company’s new product. The strategy focused on the development of a new sales channel with third-party distributors. Each of the distributors had already established close relationships with the physicians that were actually using the product during surgical procedures. To help pay for the launch of their new product, along with the execution of the new strategy, the Company was also working hard to raise a significant amount of new investment capital to fund the resulting increased operating costs. In order to be successful in attracting the new investment capital, top management made it clear to the SVP how important it was to report strong sales for its premier product, the surgical implant

for titanium joints. The SVP, in turn, passed along the same message to the regional sales managers. Management control philosophy The upper management team of Urgent can be described as being aggressive in business practices and often emphasizes speed and efficiency when implementing their decisions. Management rarely hires external consultants because they are of the opinion that consultants are too expensive and often follow a conservative approach. The upper management team meets regularly with its key managers. In general, the upper management team has cooperated with the audit team in order to provide fair and adequate financial reporting, but there have been disagreements in the past. The Company has a strict policy for following all established internal control procedures. Incentive Compensation Top management focuses significant attention on achieving short-term performance measures based on the audited financial statements when determining compensation and making promotion decisions. Revenue earned is the most important criterion in performance assessment throughout the organization. As part of the launch of its new surgical implant, a new bonus plan was established to provide additional incentives for the entire organization to focus on this new opportunity, with revenue earned as the key criterion used to determine incentive compensation.

Preliminary Results Despite the SVP’s optimism about sales in 2017, internal reports have indicated that the actual sales volume of the surgical implant was well below budget each quarter. The SVP responded to these reports by repeatedly communicating his disappointment to the regional sales managers. Furthermore, he consistently warned that if the team could not boost sales, the Company would likely not be able to raise additional investment capital and would then be forced to significantly downsize its headcount. Unfortunately, boosting revenue of the new surgical implants was not as simple as merely shipping the product to distributors. The distributors were hesitant to purchase product until the sale to the final customer was finalized as the distributors did not want to be stuck with the inventory on their own balance sheets. Further, the terms of the sales do not include any refund or rebate conditions. In addition, the Company has no intention of changing those terms and accepting any returns. Therefore, any sales to distributors are final. By the end of 2017, the Company had signed on a total of 73 distributors to sell its surgical implants in more than 20 different states throughout the U.S. Each distributor was independently owned and operated but the company routinely shared best practices among its network. The SVP monitored sales closely from the distributor network through his regional sales managers. In fact, he even maintained a monthly sales report from each of the 73 distributors.

The Company invoices customers when the goods are shipped, and invoicing triggers the recording of revenues. The Company does not include freight costs in sales revenue, but does offset shipping costs with any freight charged to customers. The following relevant financial data is taken from the Company’s unaudited trial balance, which as used to produce the unaudited financial statements: Sales Revenue, Year ended 12/31/2017 $84,867,855 Gross Accounts Receivable, 12/31/2017 $11,988,886 Audit Approach Your audit team is currently in the midst of year-end testing in the revenue and accounts receivable cycle for the audit of the calendar year 2017 financial statements. Your testing will focus on the existence/occurrence, cut-off, and accuracy assertions for sales revenue, as well as the existence and valuation assertions for accounts receivable. As relationships with third-party distributors generally require significant contract analysis to ensure the appropriateness of when revenue is recognized, the audit team expects more hours to be spent this year testing revenue and accounts receivable as compared to the prior year. In addition to the procedures you will perform, the audit team will also confirm accounts receivable and perform other procedures according to the audit plan. The audit team has assessed the risk of material misstatement (RMM) for each relevant assertion in order to determine the nature, timing, and extent of the procedures to be performed at Urgent. Other members of the audit team have already completed a walkthrough of the revenue and accounts receivable processes, identified “what could go wrongs” within the process, and identified the controls that have been placed in operation to mitigate the risks. Based on the work performed, the team decided to test the operating effectiveness of certain key controls during interim testing. The results are found below. Tests of Controls – Revenue and Accounts Receivable Cycle - Interim There are four key application controls tested at interim. Prior to testing the application controls, the information technology (IT) auditors tested the general controls (GITCs) over program changes, access to programs, and computer operations that are relevant to the revenue and accounts receivable cycle. The GITCs were found to be effective and can be relied upon to support the effective operation of application controls. In addition, the IT auditors tested the system to make sure that proper segregation of duties occurred throughout the period and that controls over data input, data integrity and the completion and accuracy of data used in the four application controls were operating effectively. No exceptions were noted in the testing performed by the IT auditors and the team decided to test the four key application controls. The first control is an automated 3-ways sales match. The control matches the details from 1) an approved sales order; 2) relevant shipping documents; and 3) the sales invoice before revenue is recorded. The control has been designed to support the existence/occurrence assertion for revenue. A test of the control’s operating effectiveness was conducted at interim. No exceptions were noted.

The second control requires the credit department at Urgent to conduct a detailed credit check for all new customers, including the new distributors. To do so, the credit department obtains information from the customer that allows for a comprehensive review of the financial condition of the new customer, and an assessment of the customer’s capacity to pay outstanding invoices. The control culminates with an approval of the new customer and the establishment of a credit limit by the credit department manager based on the information reviewed. A test of the control’s operating effectiveness was conducted at interim. No exceptions were noted. The third control is an automated sales authorization control. When a sales order is entered into the system, the amount of the sale is added to the existing accounts receivable balance for that customer. The sum is then compared to the customer’s credit limit. If the sum is greater than the credit limit, the sale is not approved. If the sum is less than the credit limit, the sale is approved. A credit manager notes the approval and authorizes shipment by electronically entering their initials into the system, which gets posted into the sales order database. A test of the control’s operating effectiveness was conducted at interim. No exceptions were noted. The fourth control is a monthly review of the adequacy of the allowance for doubtful accounts, completed by the controller. On a monthly basis, the controller reviews the aging of accounts receivable report produced by the company’s information system. During the review, the controller identifies for follow up all balances greater than 90 days past due for consideration in the allowance calculation. A test of the control’s operating effectiveness was conducted at interim. No exceptions were noted. Roll-Forward Period

By the end of the third quarter of 2017, sales revenue for the company’s premier surgical implant was still lagging far behind expectations. To help ensure that Urgent delivered impressive fourth quarter revenue numbers, the entire sales team, led by the SVP and the regional sales managers, began to exert pressure on a number of distributors in an attempt to improve sales in 2017. This effort seemed to be paying off as the sales team successfully persuaded more than a dozen distributors to purchase product in advance of final customer demand. These circumstances presented a problem for the Company, because the distributors began to ask for concessions from Urgent Medical. For example, in order to persuade the distributors, the Company agreed to hold the inventory in their own warehouse. The SVP’s actions led to a dramatic increase in revenue for the fourth quarter of 2017. In fact, sales increased year-over-year by 214% for the fourth quarter alone. The upward trajectory of sales revenue helped the Company raise the much needed investment capital as Urgent issued more than 10 million shares of common stock for $40 million in early 2018. Most importantly, roll-forward testing procedures were completed for each of the four key application controls. No exceptions were noted in the roll-forward procedures. Thus, the audit team concluded that the controls were operating effectively throughout the year.

Substantive Testing – Revenue and Accounts Receivable Cycle - Final As a result of the tests of controls, the audit team assessed the control risk as low for the existence/occurrence, cut-off and the accuracy assertions for revenue and the valuation assertion for accounts receivable. Since the recognition of revenue is a presumed fraud risk, along with the significant risk of sales cut-off related to the launch of the new surgical implant, the audit team concluded that fraud risk related to the timing of revenue recognition over period end is high. Overall, based on the control risk assessment as low and the inherent risk assessment of high, the overall assessment of RMM is moderate for each of the assertions. In response to the RMM assessment, the audit team has asked that you complete a number of substantive testing procedures. In addition, since your manager is trying to improve the efficiency and effectiveness of substantive testing, you have been asked to use two technological tools, IDEA and Tableau, to facilitate identification of potential concerns related to the substantive testing for the revenue and accounts receivable cycle. Urgent has provide you with the following databases to facilitate your testing. Database Definitions for Data Provided

1) SalesOrders – Urgent has provided the SalesOrders database, which includes a master listing of all customer orders placed during the year. The client has informed you that the database also includes sales orders from the prior year that were not completed until the current year, as well as orders taken this year that were not delivered to customers as of 12/31. This database is also the client’s primary database for the 3-way match control. When an order is shipped or invoiced, the system automatically posts the ShipID or InvoiceID to the SalesOrders database.

Column Name Column description Field type

SalesOrderID Customer order number – Primary Key Numeric (int) OrderDate Date the customer order was created Date

MM/DD/YYYY ProdID Product Number. Foreign Key to

Products.ProdID Character

CustID Distributor Number. Foreign Key to CustomerMaster.CustID

Numeric (int)

TerritoryID Territory in which the sale was made. Foreign key to SalesTerritory.TerritoryID

Numeric (int)

Quantity Quantity Ordered Numeric (int) UnitPrice Price per unit Numeric (dollars) SubTotal Sales subtotal, amount included in Sales

Revenue Numeric (dollars)

TaxAmt Tax amount Numeric (dollars) Freight Shipping Cost Numeric (dollars) TotalDue Total due from customer, amount posted

to Accounts Receivable Numeric (dollars)

CredApr Credit Approval – Initials of CM Character ShipID Shipping ID number – Foreign key to

Shipments.ShipID Numeric

InvoiceID Invoice ID number – Foreign key to Invoice.InvoiceID

Numeric

ModifiedDate Date the row was last updated Date MM/DD/YYYY

ModifiedTime Time the row was last updated Time (24 hour)

2) Shipments – Urgent has provided you with the Shipments database, which includes a listing of all shipments made during fiscal 2017, as well as shipments of products ordered during 2017 and not shipped until 2018.

Column Name Column description Field type ShipID Shipping ID Number – Primary Key Numeric (sequential int) SalesOrderID Sales order number - Foreign key to

SalesOrders.SalesOrderID Numeric (int)

ShipDate Date of shipment Date MM/DD/YYYY

ShipWeight Total Weight of Shipment Numeric (int) Carrier Shipping Carrier Character ModifiedDate Date the row was last updated Date

MM/DD/YYYY ModifiedTime Time the row was last updated Time (24 hour)

3) CustomerInvoices – Urgent has provided you with the CustomerInvoices database,

which includes a listing of all invoices issued during 2017, as well as invoices for sales orders taken during 2017, but not delivered to customers until 2018.

Column Name Column description Field type InvoiceID Invoice number – Primary Key Numeric (sequential int) CustID Distributor ID number - Foreign key to

CustomerMaster.CustID Numeric (int)

InvoiceDate Date of sales invoice Date MM/DD/YYYY

SalesOrderID Sales Order ID – Foreign key to SalesOrders

Character

PaidDate Date invoice paid, 9/9/9999 is unpaid Date MM/DD/YYYY

ModifiedDate Date the row was last updated Date MM/DD/YYYY

ModifiedTime Time the row was last updated Time (24 hour)

4) SalesTerritory – Urgent has provided you with this database listing the sales territories, as well as the sales goals for the 4th quarter 2017 for all territories.

Column Name Column description Field type TerritoryID Territory Identification Number –

Primary Key Numeric (int)

TerritoryName Name of Sales Territory Character SalesVP Name of Sales VP for Territory Character

SalesGoalQTR Quarterly Territory Sales Goal Numeric (dollars) ModifiedDate Date the row was last updated Date

MM/DD/YYYY ModifiedTime Time the row was last updated Time (24 hour)

5) CustomerMaster – Urgent has provided you with the CustomerMaster database, which

is a listing of all distributors. It classifies distributors by territory, and also includes the most current credit limit for the customer. This credit limit is used for the automated credit limit check control.

Column Name Column description Field type

CustID Distributor ID number – Primary Key Numeric (int) TerritoryID Territory in which the customer is

located. Foreign key to SalesTerritory.TerritoryID

Numeric (int)

CustName Distributor Name Character ShipAddr Distributor Shipping Address Character BillAddr Distributor Billing Address Character CredLimit Credit Approval Limit Numeric (dollars) ModifiedDate Date the row was last updated Date

MM/DD/YYYY ModifiedTime Time the row was last updated Time (24 hour)

6) Products – Urgent provided the Products database, which includes a listing of all

products currently manufactured and sold by the company. The UnitPrice is the current verified selling price and is automatically populated in SalesOrders when a customer places an order. Similarly, the Weight determines the freight charged to customers.

Column Name Column description Field type ProdID Product ID number – Primary Key Numeric (int) ProdName Product Name Character SafetyStockLevel Minimum inventory quantity Numeric (int) ReManPoint Inventory level that triggers

manufacturing additional product Numeric (int)

StandardCost Standard manufacturing cost of product Numeric (dollars) UnitPrice Selling price Numeric (dollars) Weight Shipping Weight of Product Decimal (8,2) DaysToMan Number of days required to manufacture

the product Numeric (int)

SellStartDate Date the product was available for sale Date MM/DD/YYYY

ModifiedDate Date the row was last updated Date MM/DD/YYYY

ModifiedTime Time the row was last updated Time (24 hour) Your firm’s Data and Analytics center has already converted the files, as provided by the client, into Excel format. As such, the contents and format of the databases you have been provided are exactly the same as they were provided by the client.

Start Here Sales Summary View 3 Way Match Dashboard

3 Way Match Test Sales by Territory

Urgent Medical Device Use Case

Start Here Sales Summary View 3 Way Match Dashboard

3 Way Match Test Sales by Territory

Q1 Q2 Q3 Q4

115.56% 81.69% 67.35% 85.33%

60.02% 74.73% 91.19% 76.05%

103.43%59.76% 82.14% 79.39%

80.08% 78.71% 61.33% 67.02%

100.96%61.52% 78.28% 63.83%

Sales by Territory |= Sales Goal ███ = Sales Q1 Q2 Q3 Q4

Midwest

Northeast

Southeast

Southwest

West $5.8M$3.7M$4.5M$3.5M

$1.5M$1.4M$1.8M$1.8M

$4.1M$3.2M$3.9M$5.5M

$8.3M$6.4M$6.6M$4.8M

$4.6M$5.5M$4.5M$3.6M

Sales by Territory by Quarter

$0 $10,000,000 $20,000,000

Hinged Titanium Axle Articular Tibial Component Humeral Head Acetabular Shell Modular Femoral Head Glenoid Component Femoral Knee Stem Tibial Knee Stem Glenosphere Tibial Baseplate Patella Component Metaglene Tibial Insert Cemented Stem

Product Sales click to filter timeline ►

Year of Invoice Date All

Qtr of Invoice Date All

Territory Name Multiple values

$1.4M $8.3M

SSales

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Product Sales Timeline

Territory Name Midwest Northeast Southeast Southwest West

Start Here Sales Summary View 3 Way Match Dashboard

3 Way Match Test Sales by Territory

19 17 69 26 50 39 33 40 43 61 23 49 $0

$500,000

$1,000,000

$1,500,000

$2,000,000 Sa

le s

Sales by Distributor

Southeast

Northeast

West

Midwest

Southwest

$25,977,085

$18,119,835

$17,513,945

$16,796,220

$6,460,770

Sales by Territory3 Way Match II

Midwest Northeast Southeast

Southwest West

Sales Summary View

3 Way Match Dashboard

3 Way Match Test Sales by Territory Sales by Distributor

3-Way Match Present in Sales Order Database

3 Way Match Dashboard

3 Way Match Test Sales by Territory Sales by Distributor Sales by Quarter

Southeast

Northeast

West

Midwest

Southwest

$25,977,085

$18,119,835

$17,513,945

$16,796,220

$6,460,770

3 Way Match Test

Sales by Territory Sales by Distributor Sales by Quarter Sales by Quarter for Each Territory

14 58 20 18 65 64 15 13 48 31 8 32 51 21 60 34 25 52 41 63 73 10 62 29 $0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

$1,600,000

$1,800,000

$2,000,000

Sa le

s

Territory Name Midwest Northeast Southeast Southwest West

Sales by Territory Sales by Distributor Sales by Quarter Sales by Quarter for Each Territory

Product Sales by Territory

$0

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000

$16,000,000

$18,000,000

$20,000,000

$22,000,000

$24,000,000

Sa le

s

$19,268,120

$24,246,390

Sales by Distributor

Sales by Quarter Sales by Quarter for Each Territory

Product Sales by Territory

4th QTR Sales by Territory

Q1 Q2 Q3 Q4

Midwest

Northeast

Southeast

Southwest

West $5.8M$3.7M$4.5M$3.5M

$1.5M$1.4M$1.8M$1.8M

$4.1M$3.2M$3.9M$5.5M

$8.3M$6.4M$6.6M$4.8M

$4.6M$5.5M$4.5M$3.6M

$1.4M $8.3M

SSales

Sales by Quarter Sales by Quarter for Each Territory

Product Sales by Territory

4th QTR Sales by Territory

4th QTR Sales vs Sales Goals

$0 $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000

Hinged Titanium Axle

Articular Tibial Component

Humeral Head

Acetabular Shell

Modular Femoral Head

Glenoid Component

Femoral Knee Stem

Tibial Knee Stem

Glenosphere

Tibial Baseplate

Patella Component

Metaglene

Tibial Insert

Cemented Stem

Territory Name Midwest Northeast Southeast Southwest West

Sales by Quarter for Each Territory

Product Sales by Territory

4th QTR Sales by Territory

4th QTR Sales vs Sales Goals

Sales by Q by Territory vs 4th Q ..

Southeast

West

Northeast

Midwest

Southwest

$8,274,225

$5,805,140

$4,563,280

$4,095,690

$1,508,055

2M 8M SSales

Product Sales by Territory

4th QTR Sales by Territory

4th QTR Sales vs Sales Goals

Sales by Q by Territory vs 4th Q Sa..

PCard Analysis Video

Sales VP Territory Name

$0 $2,000,000 $4,000,000 $6,000,000 $8,000,000 Sales

Dan Kwin Southeast

Anthony Linn West

Doug Petersen Northeast

Marvin Louis Midwest

Bruce Eryans Southwest

103.43%

100.96%

76.05%

85.33%

67.02%

Sales 4th Qtr vs Budget |= Sales Goal ███ = Sales Year of Invoice Date 2017

Qtr of Invoice Date Q4

4th QTR Sales by Territory

4th QTR Sales vs Sales Goals

Sales by Q by Territory vs 4th Q Sa..

PCard Analysis Video Resources

Q1 Q2 Q3 Q4

115.56% 81.69% 67.35% 85.33%

60.02% 74.73% 91.19% 76.05%

103.43%59.76% 82.14% 79.39%

80.08% 78.71% 61.33% 67.02%

100.96%61.52% 78.28% 63.83%

Sales by Territory |= Sales Goal ███ = Sales Year of Invoice Date 2017

Qtr of Invoice Date Multiple values

Requirements

1) According to the professional auditing standards, an audit team should ordinarily presume that revenue recognition is a fraud risk. Complete the following steps.

a. Based on your understanding of fraud risk assessment and the case information,

identify at least three specific fraud risk factors related to Urgent. Classify these risks in terms of What Can Go Wrong (WCGW) with each of the significant accounts and relevant assertions identified for Urgent’s revenue and accounts receivable cycle.

b. What do you believe is the most significant risk related to the revenue account for Urgent?

c. What special audit considerations would you propose in response to the significant risk you identified above? In your response, consider how you would change your approach to the nature, timing and extent of evidence in response to the identified risk.

2) Based on the tests of controls and other Information Technology General Controls (ITGC) testing, your firm has concluded that the data files supplied to you for your procedures are complete and accurate. The conclusion was based on tests of controls over data input risks including all relevant data elements (e.g., invoice date), data integrity risks, and the relevant automated application controls. However, it is also important to confirm that the data, once imported into IDEA or Tableau, was transferred into the technology tool in a complete and accurate manner prior to working with the data within the technology tool. Import all supplied data into IDEA and then reconcile the data with the supplied trial balance and check figures from the case. Simply stated, you must check that the data has been transferred in a complete and accurate manner at each step in the process. Thus, to ensure that you are working with the set of transactions and balances that the client used to calculate Sales Revenue and Accounts Receivable, answer the following questions:

a. What are the total number of valid sales that comprise the $84,867,855 Sales

Revenue shown on the trial balance as of 12/31/2017? b. What are the total number of unpaid invoices that comprise the $11,988,886 Gross

Accounts Receivable balance shown on the trial balance as of 12/31/2017?

3) Data visualization tools such as Tableau can be used to help audit teams identify items or specific areas of higher risk within an entire population. Your data and analytics center has provided you with a set of Tableau visualizations to consider during your substantive testing procedures:

i. 3-way match of SalesOrderID, InvoiceID, and ShipID based solely on

SalesOrders database ii. Sales by territory

iii. Sales by distributor iv. Sales by quarter

v. Sales by territory by quarter vi. Product sales by Territory

vii. 4th Quarter Sales by Territory viii. Sales vs. Sales Goals for 4th quarter by Territory

ix. Sales by quarter by Territory vs 4th Q Sales Goals

a. Using the data visualizations provided in Tableau, compose a memo to be included in the audit documentation file that identifies any patterns in the data that you believe may be indicative of specific audit risks. In your memo, be sure to link the identified risks to the appropriate significant account and relevant assertions.

b. Based on the analysis completed above, what further testing, if any, needs to be performed over the identified risks and the remaining population? Stated differently, do any further tests need to be performed or does the 3-way match visualization, combined with your tests of controls and additional visualizations, provide you with sufficient appropriate evidence to conclude about the occurrence of revenue at Urgent?

4) Technology tools like IDEA can also be used to help audit teams identify items with

potentially higher risks within an entire population of items in an efficient and effective manner. With this in mind, complete the following steps.

a. The SalesOrder database was used to produce a Tableau visualization of 3-way

match in the revenue cycle as described in the previous requirement. Using IDEA, verify the accuracy of the SalesOrder database by creating a 3-way match on your own using the SalesOrder, Shipments, and CustomerInvoices databases. Are your conclusions the same? If so, how does this increase your assurance about the accuracy of the SalesOrder database? If not, why not? Did you identify any specific transactions that you believe should be considered higher risk for the audit?

b. Analyze the sales revenue file using IDEA to determine whether any sales were made to distributors without an established credit limit. Are there any exceptions? If there are exceptions, what further testing would you perform on these exceptions?

c. Analyze the accounts receivable and related credit authorization limits using IDEA to determine whether any customers have account balances as of 12/31/17 that exceed their existing credit limit. Are there any exceptions to the credit limit control as of 12/31/17? Do you notice any patterns in the exceptions? What further testing would you perform on these exceptions?

d. For some time, Urgent has based its allowance for doubtful accounts on an aging analysis and the results have been historically accurate. Below, you have been provided with the client’s list of customer balances in excess of 90 days. These are the accounts that the client will consider when calculating the allowance for doubtful accounts as of 12/31/2017. Perform an aging analysis using IDEA to assess the completeness and accuracy of Urgent’s list of customer balances in excess of 90 days.

Urgent Medical Devices Analysis of >90 Day Delinquent Accounts Receivable As of December 31, 2017

SalesOrderID InvoiceDate TotalDue 3236 7/4/2017 56,251.34 3241 7/9/2017 73,450.67 3422 9/5/2017 73,450.67 3466 9/21/2017 59,932.09 3490 9/21/2017 54,851.15

317,935.92

i. Based on your analysis, does the client’s listing agree to your analysis

completed in IDEA? ii. Do you have any concerns with the client’s process for identifying the

total amount of significantly delinquent accounts? iii. According to Urgent’s unaudited trial balance, the balance for Allowance

for Doubtful Accounts is $310,000. Does the test performed above provide sufficient appropriate evidence to support a conclusion on the valuation of accounts receivable? If not, what additional testing would you recommend to reach an audit conclusion for this relevant assertion?

5) Based on your risk analysis and findings in requirements 1) through 4), perform

additional analyses using IDEA to identify specific transactions, territories, or distributors that may require additional substantive testing. Be creative when doing so. For example, consider patterns in the data provided that might indicate management override of a control activity. Focus your additional analytics on those areas. Prepare a listing of specific findings from your additional analytics that you believe warrant additional testing.

6) In order to conclude on whether the risk of material misstatement has been reduced to an acceptably low level for the relevant assertions identified, you need to consider, on an overall basis, whether the results of your procedures provide sufficient appropriate evidence. Based on the evidence that you have considered, can you reach a conclusion for the relevant assertions identified? Why or why not?

Learning Objectives of Case

1. To understand the fraud risks associated with revenue recognition and its impact on the testing of the revenue and accounts receivable cycle (demonstrated when students complete requirement 1 of the case).

2. To understand the importance of determining that a population of data is complete

and accurate prior to its use in audit testing, including understanding how to reconcile the population to the underlying books and records of the audit client (demonstrated when students complete requirement 2 of the case).

3. To learn how to interpret commonly used data visualizations and reach audit

conclusions based on the issues, objectives and alternatives that surface given the observed facts and circumstances (demonstrated when students complete requirement 3 of the case).

4. To understand how to utilize commonly used data and analytics software tools (i.e.,

IDEA and Tableau) within a realistic audit context (demonstrated when students complete requirements 3, 4 and 5 of the case).

5. To develop critical thinking skills around the identification of exceptions and risk

factors in client provided data (demonstrated when students complete requirements 3, 4 and 5 of the case).

6. Recognize the importance of reaching an overall conclusion for each relevant

assertion in accordance with applicable professional standards based on the evidential matter considered (demonstrated when students complete requirement 6 of the case).