Does something seem unusual at your client but you cannot quite identify it? Perhaps there seems to be less cash than usual and purchases are slightly up, reducing costs of goods sold, but sales have not increased.
Consider asking the client for a copy of its entire transaction file for purchasing and payments and running a series of investigative analytical review procedures.
You could run totals of purchases by supplier and by month and look for round amounts, duplicate payments, or suppliers with addresses that are the same as employee addresses. You could also ask for the payroll data file and match last names of employees with names of supplier contacts.
In any event, you will get more information about the nature of transactions and have more confidence about where to focus your audit work.
You could also identify actions that would help the company improve its purchases: for example, by testing purchases for raw materials, you could look for discrepancies in purchase cost from one supplier to the next and ask about the supplier selection process to ensure that all purchases are approved.
APPLYING YOUR PROFESSIONAL JUDGMENT
1. If you had a copy of the sales returns for a particular store, what types of data analysis would you do on the returns to look for potential fictitious returns (i.e., theft of cash)?
2. What types of transaction inquiries would you run on cash receipts in the accounts receivable file to test for lapping (i.e., theft of cash by