Reference the Excel file containing financial information from footnote disclosures and substantive analytical procedures using data analytics - ATTACHED

PharmaCorp will be used as the main analytical procedure tasks you will want to focus on for this assignment. The other companies, Novartell and AstraZoro, will be used as industry comparisons.

The opportunity exists in this case to perform planning and substantive analytical procedures for accounts in the revenue cycle. You may assume that the 2015 financial information is unaudited, but the information from 2014 has been audited. Consider the following trends and characteristics of the pharmaceutical industry and for PharmaCorp in particular as you work on this case:

• Following many years of dominant financial performance by companies in the United States, Europe, and Canada, increased competition is arising from organizations in emerging economies such as Brazil, India, and China.
• Significant uncertainty exists in the industry due to regulations covering healthcare and government reimbursements related to certain procedures and prescribed pharmaceuticals.
• Policymakers in the industry and governments increasingly:
  • Mandate necessary prescripts for patients
  • Focus on prevention instead of treatment regimes, thereby leading to changes in demand for some products
• Anticipated growth in the industry is expected to be 5% to 7% in 2016 compared with 4% to 5% in the prior year as stated by leading industry analysts.
• Pharmacorp started and executed a significant cost reduction initiative aimed at improving efficiency, reducing research and development costs, and eliminating corporate overhead in 2014.
• PharmaCorp's credit policies have remained the same over the past several years. Their credit policies are considered stringent in their industry, and they have been criticized on occasion for these policies in relation to their competitors.
• Two of the company's most popular pharmaceuticals, Sistosis and Vigarvox, are no longer patented as of the last quarter of 2015 and are now facing competition from generic alternatives.

Required:

Part I: Planning Analytical Procedures

• Step 1: Identify Proper Analytical Procedures. The senior auditor suggests you should use these ratios (on the financial statement level) for planning the analytical procedures as part of the revenue cycle at the company:
  1. Gross margin: (revenues-cost of sales)/revenues
  2. Turnover of receivables: (revenues/average accounts receivable); use the ending accounts receivable
  3. Receivables as a percentage of current assets: (accounts receivable/total current assets)
  4. Receivables as a percentage of total assets: (accounts receivable/total assets)
  5. Allowance for uncollectible accounts as a percentage of accounts receivable: (allowance/accounts receivable)
  6. Identify other relationships or trends that are relevant as part of the planning analytics. Discuss your reasons for your choices.