Bradmark Comprehensive Case

Chapter 9 – Revenue Cycle

Questions

Read the Bradmark Case located in the “Bradmark Case Description” folder and answer
the following questions:

1) From the case description and the associated flowcharts, assess Bradmark’s internal
controls over its revenue cycle procedures.

For the Sales Department, it is but right that the clerk will seek the approval of the
credit manager for customers with insufficient available credit. However, the credit
manager should not only verbally authorize the clerk to change credit limits. More so, it
is inappropriate for him to delegate the said task to the clerk as it violates the general
control of authorization.

Reconciliation of the documents – packing slip, shipping notice, and bill of lading –
with the goods to be shipped must likewise be done for independent verification.
Several copies of these documents must be made to be filed for future reference and
monitored by the departments responsible in the each of the operational processes. In
conclusion, Bradmark needs to improve some of the internal controls over its revenue
cycle procedures.

In the warehouse department, once the sales orders have been received, the clerks
automatically print the stock release. The goods are sent to the Shipping Department
along with the stock release document. Once the goods have left the warehouse, the
clerk confirms to the system the quantity sold and it automatically updates the Quantity
on Hand field in the respective inventory record.

2) Using the case description, the flowchart, the file structures, and the selected
financial data below, specify an audit objective (that can be achieved using ACL™) for
each management assertion presented in the matrix below. For each audit objective,
briefly describe the ACL test procedure. As an example, the first row in the matrix has
been completed for you.
 Selected Bradmark Financial Data

Sales 5,379,996.96

Accounts Receivable 4,752,257.70

Allowance for Doubtful Accounts (.02 x Sales) 107,600
Net Accounts Receivable 4,644,657.70

Management Assertion Audit Objective Audit Procedures to be

Performed Using ACL

Existence or Verify that the AR represents Use ACL to prepare

Occurrence actually owed to Bradmark confirmation letters for
customers
Completeness Determine that all amounts owed We used the gaps to identify
to the organization at the balance missing document in the
sheet date are reflected at the bradmark’s transactions.
accounts receivable.

Verify that all sales for shipped

goods, all services rendered, and
all returns and allowances for the
period are reflected in the
financial statements.
Valuation or Allocation Determine that the accounts
receivable balance states its net
realizable value.
Establish that the allocation for
uncollectible accounts is
appropriate.
We used the duplicate to
determine whether there are
records that are repeated.
We used the STRARIFY &
Classify to determine the
anomalies. It is useful to know
whether all receivables
represents all amounts owed
by bradmark for every goods
purchased.
Accuracy Verify that the revenue STRATIFY ON Unit_Cost
transaction are accurately COUNT IF Quan_On_Hand <= 0
computed and based in current
prices and correct quantities.

Ensure that the AR subsidiary

ledger. The sales invoice file, and
the remittance file are
mathematically correct and agree
with general ledger accounts.

To answer parts 3 and 4 requires that you install ACL™ Desktop Edition (full
educational version) on your computer. To do so follow the instruction on the CD that
came with the textbook. The ACL Project and ACL files used in the Bradmark case
are located in the Bradmark Data Folder on the website. Download these files to
your computer and click on the Bradmark 04 ACL icon. ACL will automatically open the
case.

3) Perform the ACL tests outlined in step 2 above. Hand in a report describing the audit
tests and your conclusions about the results of the test. To document your findings
include in your report ACL printouts showing details of test results and the command
log.

Existence or Occurrence

To whom it may concern:

In accordance with the request from our external auditors, we ask that you
confirm your outstanding account balance with our organization. Our records indicate
that your account balances as of (end period date) amounted to ($ amount).
If your records agree with this balance, please indicate by signing the space
provided below and return this letter directly to our auditors using the enclosed
envelope. Your prompt compliance with this request is greatly appreciated.
If the amount indicated is not agreement with the records, inform the auditors
directly using the enclosed envelope. In your response, please show the amount owed
according to your records and include full details of the discrepancy.

Sincerely,
Bradmark

The amount stated above is correct: (Customer Name)

Completeness

As of: 05/08/2015 16:09:04

Command: GAPS ON Invoice_Number PRESORT TO SCREEN

Table: Sales_Invoice
As of: 05/08/2015 15:45:06

173 gap ranges detected

13696 missing items

Gaps Found Between:

Gap Start Gap End Number of
(Exclusive) (Exclusive) Missing Items
200,000 202,284 2,283
202,284 203,065 780
203,065 203,452 386
203,452 203,614 161
203,614 205,605 1,990
205,605 206,300 694
206,300 207,137 836
207,137 211,206 4,068
211,206 212,297 1,090
212,297 212,334 36
212,334 212,592 257
212,592 212,824 231
212,824 213,052 227
213,052 213,133 80
213,139 213,151 11
213,151 213,184 32
213,184 213,194 9
213,194 213,204 9
213,204 213,227 22
213,227 213,240 12
213,240 213,248 7
213,248 213,256 7
213,256 213,264 7
213,264 213,277 12
213,277 213,285 7
213,285 213,290 4
213,290 213,293 2
213,297 213,299 1
213,299 213,304 4
213,304 213,309 4
213,309 213,317 7
213,318 213,325 6
213,328 213,342 13
213,342 213,350 7
213,351 213,354 2
213,355 213,357 1
213,358 213,369 10
213,370 213,377 6
213,377 213,385 7
213,387 213,390 2
213,392 213,398 5
213,398 213,406 7
213,406 213,409 2
213,409 213,411 1
213,412 213,418 5
213,418 213,420 1
213,421 213,423 1
213,425 213,430 4
213,430 213,432 1
213,433 213,436 2
213,436 213,438 1
213,440 213,442 1
213,442 213,444 1
213,444 213,446 1
213,446 213,448 1
213,450 213,457 6
213,457 213,474 16
213,474 213,476 1
213,476 213,490 13
213,490 213,492 1
213,492 213,508 15
213,508 213,510 1
213,512 213,514 1
213,515 213,517 1
213,517 213,522 4
213,522 213,531 8
213,532 213,537 4
213,537 213,542 4
213,542 213,558 15
213,558 213,562 3
213,562 213,564 1
213,567 213,569 1
213,569 213,572 2
213,572 213,577 4
213,577 213,580 2
213,580 213,591 10
213,591 213,593 1
213,598 213,607 8
213,608 213,611 2
213,611 213,622 10
213,622 213,633 10
213,633 213,644 10
213,644 213,646 1
213,647 213,650 2
213,651 213,655 3
213,656 213,661 4
213,662 213,666 3
213,666 213,672 5
213,676 213,680 3
213,681 213,685 3
213,685 213,690 4
213,691 213,695 3
213,695 213,697 1
213,700 213,702 1
213,702 213,704 1
213,704 213,707 2
213,707 213,711 3
213,712 213,714 1
213,719 213,721 1
213,722 213,727 4
213,728 213,730 1
213,731 213,734 2
213,734 213,736 1
213,739 213,746 6
213,748 213,753 4
213,753 213,755 1
213,755 213,760 4
213,760 213,765 4
213,767 213,771 3
213,771 213,776 4
213,778 213,783 4
213,783 213,786 2
213,787 213,791 3
213,791 213,799 7
213,799 213,804 4
213,805 213,808 2
213,808 213,814 5
213,816 213,818 1
213,818 213,820 1
213,820 213,823 2
213,823 213,825 1
213,826 213,829 2
213,829 213,832 2
213,833 213,837 3
213,837 213,839 1
213,841 213,846 4
213,859 213,862 2
213,863 213,865 1
213,865 213,867 1
213,868 213,870 1
213,872 213,875 2
213,876 213,879 2
213,879 213,881 1
213,885 213,887 1
213,888 213,891 2
213,894 213,896 1
213,897 213,899 1
213,901 213,904 2
213,912 213,914 1
213,916 213,919 2
213,920 213,922 1
213,923 213,925 1
213,927 213,929 1
213,930 213,933 2
213,941 213,943 1
213,943 213,946 2
213,948 213,950 1
213,950 213,952 1
213,952 213,955 2
213,956 213,959 2
213,962 213,964 1
213,965 213,967 1
213,971 213,973 1
213,977 213,981 3
214,013 214,015 1
214,026 214,028 1
214,049 214,051 1
214,068 214,070 1
214,082 214,084 1
214,141 214,143 1
214,149 214,151 1
214,178 214,180 1
214,189 214,191 1
214,194 214,196 1
214,202 214,204 1
214,204 214,206 1
214,259 214,261 1
214,335 214,337 1
214,341 214,343 1
214,354 214,356 1
 214,361 214,363 1
214,374 214,376 1
214,393 214,395 1

Valuation or Allocation

Command: STRATIFY ON Amount_Due MINIMUM -1000 MAXIMUM 5549.19

INTERVALS 10 TO SCREEN
Table: Sales_Invoice

Minimum encountered was 0.00

Maximum encountered was 55,491.90

Amount_Due Count Percent of Count Percent of Field Amount_Due

-1,000.00 - -345.09 0 0% 0% 0.00
-345.08 - 309.83 52 7.43% 0.16% 8,648.80
309.84 - 964.75 69 9.86% 0.74% 39,909.50
964.76 - 1,619.67 34 4.86% 0.84% 45,339.30
1,619.68 - 2,274.59 17 2.43% 0.65% 35,195.60
2,274.60 - 2,929.51 8 1.14% 0.39% 20,863.30
2,929.52 - 3,584.43 34 4.86% 2.06% 110,807.10
3,584.44 - 4,239.35 30 4.29% 2.17% 116,524.60
4,239.36 - 4,894.27 35 5% 2.97% 159,927.40
4,894.28 - 5,549.19 30 4.29% 2.93% 157,387.40
>5,549.19 391 55.86% 87.09% 4,685,393.96
Totals 700 100% 100% 5,379,996.96
As of: 05/08/2015 15:48:59

Command: CLASSIFY ON Customer_Num SUBTOTAL Amount_Due Remit_Num TO

SCREEN
Table: Sales_Invoice

Customer_Num Count Percent of Count Percent of Field Amount_Due Remit_Num

51593 2 0.29% 0.23% 12,625.10 12,734
56016 2 0.29% 0.34% 18,076.60 25,399
65003 100 14.29% 19.64% 1,056,681.40 280,644
81559 1 0.14% 0.33% 17,790.70 0
90398 2 0.29% 0.12% 6,343.80 0
97627 1 0.14% 0.24% 13,018.30 0
113236 1 0.14% 0.13% 6,819.30 0
176437 16 2.29% 2.8% 150,671.10 63,822
202028 4 0.57% 0.33% 17,943.40 12,738
207275 3 0.43% 0.68% 36,786.80 0
222006 10 1.43% 1.23% 66,236.40 38,184
230575 6 0.86% 0.06% 3,405.90 25,432
231494 1 0.14% 0.28% 15,189.10 0
241370 1 0.14% 0.15% 8,220.80 0
242605 2 0.29% 0.29% 15,370.50 0
250402 2 0.29% 0.11% 6,016.00 0
258024 2 0.29% 0.21% 11,142.50 0
262001 85 12.14% 10.82% 582,218.50 305,975
264629 4 0.57% 0.09% 4,892.00 0
269267 1 0.14% 0% 0.00 12,801
277097 1 0.14% 0.09% 4,610.80 12,696
284354 1 0.14% 0.24% 12,967.10 0
297397 18 2.57% 2.84% 152,783.40 25,562
301037 1 0.14% 0.25% 13,212.40 12,697
329169 1 0.14% 0.11% 6,089.00 0
359310 1 0.14% 0.11% 6,009.80 0
376005 28 4% 2.96% 159,491.60 38,131
419449 1 0.14% 0.27% 14,686.10 12,759
444413 2 0.29% 0.27% 14,595.40 0
463451 1 0.14% 0.06% 3,355.50 0
478604 3 0.43% 0.23% 12,359.20 0
501657 34 4.86% 6.42% 345,350.40 228,591
503458 1 0.14% 0.09% 4,757.30 0
504356 1 0.14% 0.31% 16,414.10 0
512328 3 0.43% 0.56% 30,141.50 12,754
513574 5 0.71% 0.03% 1,415.40 25,541
516372 88 12.57% 9.14% 491,658.96 419,660
518008 14 2% 1.27% 68,490.00 38,051
519311 1 0.14% 0.08% 4,344.40 0
535189 2 0.29% 0.14% 7,321.50 12,765
549479 1 0.14% 0.41% 21,929.40 12,772
559491 1 0.14% 0.72% 38,568.80 0
561669 2 0.29% 0.1% 5,220.40 0
562270 4 0.57% 0.04% 1,975.60 0
564291 3 0.43% 0.3% 16,323.90 0
620304 2 0.29% 0.19% 10,139.90 0
641464 34 4.86% 5.16% 277,604.50 63,906
739622 1 0.14% 0.11% 5,793.60 0
778088 5 0.71% 0.34% 18,079.10 12,809
784647 3 0.43% 0.26% 14,042.80 12,663
795401 3 0.43% 0.16% 8,814.90 12,660
797352 2 0.29% 0.2% 10,806.80 0
811002 55 7.86% 7.24% 389,693.40 127,747
812465 10 1.43% 1.76% 94,851.20 38,236
815062 2 0.29% 0.07% 3,967.50 12,805
820025 2 0.29% 0.16% 8,627.00 0
836004 9 1.29% 1.42% 76,186.90 0
869033 2 0.29% 0.2% 10,628.30 0
878035 2 0.29% 0.21% 11,212.00 25,405
914508 1 0.14% 0.1% 5,460.20 0
925007 93 13.29% 15.96% 858,556.70 89,472
938010 5 0.71% 0.87% 46,590.50 12,695
962353 3 0.43% 0.36% 19,439.40 12,774
994403 2 0.29% 0.11% 5,982.10 12,694
Totals 700 100% 100% 5,379,996.96 2,063,574

ACCURACY

As of: 05/16/2015 11:46:10

Command: COUNT IF Quan_On_Hand <= 0

Table: Inventory

If Condition: Quan_On_Hand <= 0 (1 records matched)

1 records counted

As of: 05/16/2015 11:49:11

Command: STRATIFY ON Unit_Cost MINIMUM -6.87 MAXIMUM 381.2 INTERVALS 10

TO SCREEN
Table: Inventory

Minimum encountered was 0.01

Maximum encountered was 381.20

Unit_Cost Count Percent of Count Percent of Field Unit_Cost

-6.87 - 31.93 131 86.18% 38.55% 1,025.09
31.94 - 70.74 16 10.53% 26.25% 698.14
70.75 - 109.55 1 0.66% 3.29% 87.40
109.56 - 148.35 1 0.66% 5.18% 137.80
148.36 - 187.16 2 1.32% 12.39% 329.60
187.17 - 225.97 0 0% 0% 0.00
225.98 - 264.77 0 0% 0% 0.00
264.78 - 303.58 0 0% 0% 0.00
303.59 - 342.39 0 0% 0% 0.00
342.40 - 381.20 1 0.66% 14.33% 381.20
Totals 152 100% 100% 2,659.23

4) Using the matrix format below, identify an operational (business) concern related to
the revenue procedures. Briefly describe the audit objective and ACL procedures to
answer this concern. Perform the ACL test and prepare a report with your conclusions.
Document your report with ACL printouts showing details of test results and the
command log.

Other Operational Audit Objective Audit Procedures to be

Concerns Performed Using ACL

Segregation of duties - Establish that purchase
transactions are accurately
computed and based on correct
prices and quantities
The auditor can use ACL’s
Stratify and Classify features
to identify various
characteristic and anomalies
associated with accounts
receivables procedures.
 TOMAS CLAUDIO COLLEGES

Taghangin Morong, Rizal

BRADMARK COMPREHENSIVE CASE

Presented to

Prof. Anita Santiago

In Partial Fulfillment of the Requirements of the Course In

Auditing in a C/S Environment

BA 73

GIEZELLE MAE GONZALES

May 2015