Scoring template TABLE 2 Development of Audit Objectives^1

Team School 1

Individual Participant School 2

Audit Objective by Assertion

1

2

3

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

Number of audit objectives: 8 scored

Number of audit objectives

7

4

9

6

5

17

12

4

8

4

8

4

4

4

5

4

5

7

4

4

Number of relevant audit objectives (scored as ● or ¤)

3

3

3

5

5

3

5

4

4

4

2

3

4

4

2

3

5

3

1

2

Existence

Observe client’s year-end  inventory count^2

Cutoff: Sample receiving reports^2

Cutoff: Sample sales transactions^2

1. Verify payment for purchases

¤

¤

¤

¤

●

¤

2. Verify paid-for inventory adequate for sales (in aggregate)

Completeness

Trace test counts into inventory compilation^2

3. Verify adjustments applied based on year-end count

¤

¤

¤

¤

¤

●

●

●

●

¤

¤

¤

●

●

¤

¤

¤

¤

¤

●

4. Verify inclusion of purchases in inventory

●

●

●

¤

¤

●

Rights/obligations

Determine whether any inventory is pledged^2

5. Verify that all inventory (by SKU) was purchased

●

●

¤

¤

●

●

¤

●

Valuation

Vouch sample of inventory items to invoices^3

Verify markdowns for sample of oldest SKUs^3

Verify reasonableness of client adjustments^3

6. Verify application of markdown policy for LCM

¤

¤

●

●

●

¤

¤

●

●

¤

¤

●

●

7. Verify agreement of inventory costs and invoice costs

¤

●

¤

●

¤

¤

●

¤

Presentation/disclosure

Verify mathematical accuracy of inventory calculations^3

8. Verify agreement of detail records with GL balances

●

¤

●

●

●

●

●

¤

¤

●

●

¤

¹   A dot (●) in a cell denotes a reasonable statement of the audit objective. A circle with a dot (¤) denotes a marginal statement of the audit objective. A blank cell denotes inadequate, erroneous, irrelevant, or missing statements of an audit objective.

²   Audit objective supplied to all participants in prior year audit program; audit objective with results supplied to school 2 participants in current year audit program.

³   Audit objective supplied to participants at school 2 only in current year audit results to date.

TABLE 3 Design of Audit Procedures by Audit Objective^1

Team School 1

Individual Participant School 2

Audit Objective by Assertion

1

2

3

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

Existence

1. Verify payment for purchases

¤

●

●

¤

●

●

2. Verify inventory consistent with sales (in aggregate)

Completeness

3. Verify adjustments applied based on year-end count

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

¤

4. Verify inclusion of purchases in inventory

●

●

●

●

●

Rights/obligations

5. Verify that all inventory (by SKU) was purchased

●

●

●

¤

●

●

¤

¤

¤

Valuation

6. Verify application of markdown policy for LCM

●

●

●

¤

●

¤

●

¤

●

¤

¤

●

●

7. Verify agreement of inventory costs and invoice costs

●

●

●

¤

¤

●

●

Presentation/disclosure

8. Verify agreement of detail records with GL balances

●

●

¤

●

¤

●

●

¤

¤

¤

●

¤

¹  A dot (●) in a cell denotes a reasonable statement of the design of audit procedures for that audit objective. A circle with a dot (¤) denotes a marginal statement of the audit procedure. A blank cell denotes inadequate, erroneous, or missing, statements of the audit procedure.

TABLE 4 Audit Procedures: Execution of Technical Plan^1

Team School 1

Individual Participant School 2

Audit Objective by Assertion

1

2

3

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

Existence

1. Verify payment for purchases

¤

●

●

¤

●

●

2. Verify inventory consistent with sales (in aggregate)

Completeness

3. Verify adjustments applied based on year-end count

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

¤

4. Verify inclusion of purchases in inventory

●

●

●

●

●

Rights/obligations

5. Verify that all inventory (by SKU) was purchased

●

¤

●

¤

¤

¤

¤

¤

¤

Valuation

6. Verify application of markdown policy for LCM

●

●

●

¤

●

¤

●

¤

●

¤

●

●

●

7. Verify agreement of inventory costs and invoice costs

●

●

●

¤

¤

●

●

Presentation/disclosure

8. Verify agreement of detail records with GL balances

●

●

¤

●

●

¤

¤

¤

●

¤

¹  A dot (●) in a cell denotes a reasonable execution of the audit procedures for that audit objective. A circle with a dot (¤) denotes a marginal execution of the audit procedures. A blank cell denotes inadequate, erroneous, or missing executions of the audit procedures.

TABLE 5 Interpretation of Evidence^1

Team School 1

Individual Participant School 2

Audit Objective by Assertion

1

2

3

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

Existence

1. Verify payment for purchases

¤

●

¤

●

●

2. Verify inventory consistent with sales (in aggregate)

Completeness

3. Verify adjustments applied based on year-end count

¤

●

●

¤

¤

¤

¤

¤

●

¤

¤

¤

¤

¤

¤

¤

4. Verify inclusion of purchases in inventory

●

●

●

¤

¤

Rights/obligations

5. Verify that all inventory (by SKU) was purchased

●

●

¤

¤

¤

¤

¤

¤

Valuation

6. Verify application of markdown policy for LCM

●

●

¤

¤

¤

¤

¤

¤

●

¤

●

●

●

7. Verify agreement of inventory costs and invoice costs

¤

●

●

¤

¤

●

●

Presentation/disclosure

8. Verify agreement of detail records with GL balances

●

¤

●

●

¤

¤

Propagation of adjustments

Note need to propagate adjustments to stores 1 and 2.

●

¤

¤

¤

●

¹ A dot (●) in a cell denotes a reasonable interpretation of the numerical outcomes from execution of audit procedures for that audit objective. A circle with a dot (¤) denotes a marginal interpretation of the results. A blank cell denotes inadequate, erroneous, or missing interpretations of the results.

TABLE 6 Identification of Anomalous Conditions and Their Investigation^1

Team School 1

Individual Participant School 2

Condition

1

2

3

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

Existence

1. Absence of payments for 30% of inventory

●

¤

●

2. Paid-for inventory enabling only 70% of sales in the GL

Potential explanations:

a. Payments due but not paid

●

●

b. Payments in dispute

●

c. Payments miscoded

d. Payments non-existent but sales inflated

Completeness

SKUs of early purchases missing from inventory

●

●

●

Potential explanation:

Early, sold-out SKUs archived off-line

¤

Rights/obligations

Insufficient data to verify purchases for inventory

Potential investigation:

Get access to all sales to match to purchases

Valuation

No condition to investigate

Presentation/disclosure

No condition to investigate

Propagation of adjustments

No condition to investigate

¹  A dot (●) in a cell denotes the participant offering a reasonable identification of conditions warranting further investigation or a potential explanation of an anomalous condition to be investigated. A circle with a dot (¤) denotes a marginal identification or explanation. A blank cell denotes inadequate, erroneous, or missing identifications or explanations.

TABLE 7                                   Performance Lapses By Participant^1
										Team School 1				Individual Participant School 2
	Performance Lapse	1	2	3	1	2	3	4	5		6	7	8		9	10	11	12	13	14	15	16	17
	Audit objective														4				4			1
	1. Audit objective not phrased in terms of a management assertion			2
	2. Audit objective insufficient to develop audit procedures			2
	3. Audit objective incomplete or not stated convincingly	3	3	3	1	4			2		4	1			2	1	1	2	2			2
	4. Audit objective not significantly relevant to the application	4	1	4		1	5				4