Quick Guide on Smartbooks IT Audit with Analytics

Smartbooks
IT Audit with Analytics
Quick guide on ERP and PBI

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Quick Guide on Smartbooks IT Audit with Analytics

TABLE OF CONTENTS
TABLE OF CONTENTS..................................................................................................................................... 2
Chapter 1: Smartbooks on a Cloud Platform ................................................................................................ 5
What is an ERP System? ............................................................................................................................ 5
What is Cloud Computing? ....................................................................................................................... 5
Types of Cloud Deployment .................................................................................................................. 6
Key Features of Cloud Computing ........................................................................................................ 6
Smartbooks on Cloud Performance .......................................................................................................... 7
Technical Specifications ........................................................................................................................ 7
Chapter 2: Getting Started with Smartbooks ............................................................................................... 8
Challenges for SMEs .................................................................................................................................. 8
Smartbooks Framework ............................................................................................................................ 9
Basic Navigation ...................................................................................................................................... 10
Logging-in ................................................................................................................................................ 10
Smartbooks User Interface ..................................................................................................................... 13
Header................................................................................................................................................. 13
Modules Menu / Main Menu .............................................................................................................. 13
User Info.............................................................................................................................................. 14
Status Bar ............................................................................................................................................ 14
System Date & Time ............................................................................................................................ 15
Operation Modes in Smartbooks ........................................................................................................ 15
Functions in a Form............................................................................................................................. 15
Customize User Credentials ................................................................................................................ 15
Exercises .................................................................................................................................................. 17
Chapter 3: Introduction to Information Technology Audit ......................................................................... 18
What is an Information Technology (IT) Audit? ...................................................................................... 18
IT Audit Objectives .................................................................................................................................. 18
IT Audit vs. Financial Statement Audit and Compliance Audit ............................................................... 18
Chapter 4: IT Audit Process ......................................................................................................................... 20
Overview of the Four (4) Phases of an IT Audit ...................................................................................... 21
Exercises .................................................................................................................................................. 23

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Quick Guide on Smartbooks IT Audit with Analytics

Chapter 4: Test of Controls ........................................................................................................................ 24

What is an Internal Control? ................................................................................................................... 24
Objectives of Internal Control ................................................................................................................. 24
Modifying Assumptions .......................................................................................................................... 24
Five Components of Internal Control (CRIME)........................................................................................ 25
ACTIVITY 1: Transaction Authorization ................................................................................................... 28
Perform transaction with a programmed procedure ...................................................................... 28
Exercises .............................................................................................................................................. 30
ACTIVITY 2: Transaction Authorization ................................................................................................... 31
Perform transaction with a programmed procedure ...................................................................... 31
Exercises .............................................................................................................................................. 32
ACTIVITY 3: Segregation of duties ........................................................................................................... 33
Business Process Segregation............................................................................................................ 33
Log in to the account of manager to view the authorizations made for Lukas Ibarra...................... 33
Test the Segregation of Duties by checking if the Authorizations are functioning properly................ 34
Exercises .............................................................................................................................................. 36
ACTIVITY 4: Accounting Records ............................................................................................................. 37
Identify which document in Smartbooks can give simple audit trail. ................................................. 37
Exercises .............................................................................................................................................. 50
ACTIVITY 5: Source Document Controls.................................................................................................. 51
Exercises .............................................................................................................................................. 52
ACTIVITY 6: Data Coding Controls ........................................................................................................... 53
Exercises .............................................................................................................................................. 54
ACTIVITY 7: Field Integration .................................................................................................................. 55
Exercises .............................................................................................................................................. 58
ACTIVITY 8: Audit Trail Controls .............................................................................................................. 59
View some techniques used to preserve audit trails in Smartbooks. ............................................. 59
Exercises .............................................................................................................................................. 63
Chapter 5: Substantive Tests ...................................................................................................................... 64
What is Substantive Procedure? ............................................................................................................. 64
Substantive Tests of Revenue Cycle........................................................................................................ 64
ACTIVITY 9: Review Sales Document Balances for Unusual Trends and Exceptions .............................. 65

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Quick Guide on Smartbooks IT Audit with Analytics

A. Review Sales Documents and Balances for Unusual Trends and Exceptions ............................... 65
B. Review customer balances for unusual trends and exceptions ............................................... 68
C. Review List of Customers for any duplicate items ...................................................................... 72
Exercises .................................................................................................................................................. 73
ACTIVITY 10: Testing the Valuation and Allocation Assertion ................................................................ 74
View the Aging of Accounts Receivable and provide for Allowance for Doubtful Accounts based on
Company’s policies. ............................................................................................................................. 74
Exercises .................................................................................................................................................. 75
Substantive Tests of Expenditure Cycle .................................................................................................. 76
ACTIVITY 11: Review of A/P Unusual Trends and Exceptions (Use Auditor’s Account) .......................... 77
Review A/P Invoices Unusual Trends and Exceptions ......................................................................... 77
Exercises .................................................................................................................................................. 79
ACTIVITY 12: Testing the Completeness Assertion ................................................................................. 80
Examine the documents that are still open that might lead to understatement of accounts. .......... 80
Exercises .................................................................................................................................................. 82
ACTIVITY 13: Testing the Existence Assertion ......................................................................................... 83
Verify if there are payments for December 2021 that are posted on January 2022.......................... 83
Exercises .................................................................................................................................................. 85
ACTIVITY 14: Testing the Valuation and Allocation Assertion ................................................................ 86
View the Aging of Accounts Payable as a basis for sending the confirmation to the vendors ........... 86
Substantive Test of Other Financial Statement Accounts ...................................................................... 89
Audit of Cash ....................................................................................................................................... 89
Exercises .................................................................................................................................................. 93
Audit of Inventories ............................................................................................................................ 94
Exercises .................................................................................................................................................. 95
Audit of Prepayments ......................................................................................................................... 96
Exercises ................................................................................................................................................ 101
Audit of Fixed Assets ......................................................................................................................... 102
Exercises ................................................................................................................................................ 105
Chapter 6: IT Audit Report ........................................................................................................................ 106

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Quick Guide on Smartbooks IT Audit with Analytics

Chapter 1: Smartbooks on a Cloud Platform

At the end of this chapter, students will be able to:
• Know what is an ERP System
• Understand the difference between on premise and on cloud system experience.
• List the benefits of cloud computing
• Know the Smartbooks on cloud performance

What is an ERP System?

ERP stands for Enterprise Resource Planning, and an ERP system is a type of software that integrates a variety of
business processes and functions into a single system. An ERP system typically includes modules for areas such
as accounting, human resources, customer relationship management, supply chain management, inventory
management, and production planning.

Image from: www.projectline.ca

The primary objective of an ERP system is to provide a single source of truth for all business data, making it easier
for companies to manage their operations more efficiently and effectively. By consolidating data from different
departments, an ERP system can eliminate the need for multiple, disconnected software applications, and help
to streamline business processes, improve collaboration between departments, and increase data accuracy and
consistency.

What is Cloud Computing?

Cloud computing represents a new way to deploy computing technology to give users the ability to access, work
on, share, and store information using the internet. The ideal way to describe Cloud Computing would be to term
it as 'Everything as a Service' (abbreviated as XaaS). The cloud itself is a complex network of data centers, each
composed of thousands of computers working together that can perform and achieve the functions of a software
on a personal or business computer units by providing users access to a vast number of applications, platforms
and services delivered over the Internet.

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Quick Guide on Smartbooks IT Audit with Analytics

Types of Cloud Deployment

PRIVATE CLOUD
Private Cloud, also known as Internal Cloud, is a cloud-based infrastructure operated exclusively for a single
organization with all data protected behind an internal firewall. This is usually physically located at the company's
on-site data center or can also be managed and hosted by a third-party provider.

PUBLIC CLOUD
Public Cloud, also known as External Cloud, is available to the public where data are created and stored on third-
party servers. Service infrastructure belongs to service providers that manage them and administer pool
resources. The need for user companies to buy and maintain their own hardware is eliminated. It is based on a
shared cost model for all the users or in the form of a licensing policy such as pay per use.

HYBRID CLOUD
Hybrid Cloud encompasses the best features of the above-mentioned cloud computing deployment models. It
allows companies to mix and match the facets of public and private cloud that best suit their requirements.

Key Features of Cloud Computing

The characteristics of Cloud Computing express its significance in the current business market. It has already
been proven that Cloud Computing is a model for enabling universal, convenient and on-demand network access.
Below are the key features of Cloud Computing:

• Agility -helps in rapid and inexpensive re-provisioning of resources

• Location Independence - resources can be accessed anywhere (except on limitations set by company's
internal control)

• Multi-Tenacity - resources are shared amongst a large pool of users

• Reliability - dependable accessibility of resources and computation

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Quick Guide on Smartbooks IT Audit with Analytics

• Scalability - dynamic provisioning of data helps in avoiding various bottleneck scenarios

• Ease of Maintenance - users (companies/organizations) have less work in terms of resource upgrades
and management, handled by service providers of cloud computing

Smartbooks on Cloud Performance

Smartbooks is a purely web-based ERP system for small and medium sized enterprises. Smartbooks is a software
that easy to use, has deep functionality, is accessible and is compliant with BIR reporting requirements. It is best
for small- and medium-sized companies with their unique qualities and special needs.

And because Smartbooks is based in the cloud, other IT costs are eliminated, such as the cost of putting up and
maintaining servers, hiring and maintaining an IT team, upgrading the software and spending for other support
expenses.

Technical Specifications
Smartbooks has minimal requirements when it comes to technical specifications so it can offer a simpler, more
cost-effective and more reliable solution for businesses. The following are the technical specifications needed in
order to access Smartbooks:

Can be accessed on various operating systems like:

Through web browsers like:

The optimal performance of the system is on an internet speed of 5 mbps and higher but can be accessed on a
minimum speed of 1 mbps.

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Quick Guide on Smartbooks IT Audit with Analytics

Chapter 2: Getting Started with Smartbooks

At the end of this chapter, students will be able to:

• Learn how to use the various user interface components of Smartbooks
• Familiarize and visualize the illustration to Smartbooks Framework
• Learn to value of information in scaling up businesses
• Identify the basic functionalities inside an ERP System (Interface, Operation
Modes, Functions in a document, Credentials Changing and Master Record) using
Smartbooks.

Challenges for SMEs

SME companies often acquire multiple solutions to meet specific needs as business expands; for example, an
accounting application to manage general ledgers and invoices, or a Storage Location management solution to
keep track of inventory.

Keeping this combination of applications up to date, integrated, and running seamlessly can be challenging. To
get a picture of what is happening in every part of the business, it takes a lot of time and effort to extract and
reconcile data across many solutions. While such applications may be effective for a time, ultimately your
business needs a more flexible and integrated solution.

With SMARTBOOKS, it is now possible to have a complete and real-time picture of your financial position. Having
this information readily available gives you more time to focus on growing your business.

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Quick Guide on Smartbooks IT Audit with Analytics

Smartbooks Framework

Smartbooks Cloud ERP system is composed of multiple modules. The above illustration shows the structure of
the system. Smartbooks accepts data entry, called transactions, which are converted through various processes
into output information that goes out to the users. Sales of products from customers, purchases of inventory
from Suppliers, and cash disbursements and receipts are the common type of transactions.

Smartbooks is composed of three major units:

1. Transaction Processing
This supports daily business operations with numerous reports, documents, and messages from users
throughout the organization. Transaction processing consists of three different cycles: the revenue, the
expenditure, and the project management. Each cycle captures and processes different types of financial
transactions;

2. General Ledger/Financial Reporting

This produces the traditional Financial Statements, such as Income Statement, Balance Sheet, Statement of Cash
Flow, Tax Returns, Reports / Schedules, and other reports mandated by the government.

3. Management Reporting
This provides internal management reports needed for decision making.

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Quick Guide on Smartbooks IT Audit with Analytics

Basic Navigation
Smartbooks was designed with the most comprehensive User Interface in mind. You don’t need expert
technical knowledge to navigate through the portal because it was designed with utmost simplicity.

Logging-in
1. Go to https://portal.fitacademy.ph

2. Click Register > Fill up registration form >”University Code” will be provided by instructor > Click
Register
3. Check your email for account activation and activate your account.

4. Input your credentials (email and password) and login.

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Quick Guide on Smartbooks IT Audit with Analytics

5. Go to Dashboard. “Section Code” will be provided by your instructor.

6. Click Add Code.

7. Once the code has been added, your user ID and password will appear.
8. Click Open Smartbooks URL to access Smartbooks.
9. Click Reset Password should you forgot your password.

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Quick Guide on Smartbooks IT Audit with Analytics

10. Input the User ID and Password provided by the portal on Smartbooks Login Page.

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Quick Guide on Smartbooks IT Audit with Analytics

Smartbooks User Interface

Header
The header of the Smartbooks User Interface contains the logo of Smartbooks and the name of the company.

Modules Menu / Main Menu

Navigation in Smartbooks is done using the Modules Menu/Main Menu. It arranges the functions of the
individual process and applications in a tree-like structure. This menu contains a list of all modules with their
related options.

The features for this menu:

1. Are arranged accustomed to per user basis and need of access.

2. May be inactive for unauthorized users and will not modify some of the transactions.

The following modules are the primary content of the system:

Financials & Accounting

▪ Generate different financial reports

▪ Inquire about any account over any period
▪ Post transactions automatically without undergoing a separate process
▪ Generate BIR Reports
▪ Other features include: producing journal narratives, posting journals to any number of periods, reversal
of journal entries

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Quick Guide on Smartbooks IT Audit with Analytics

Inventory Management

▪ Maintain unlimited number of warehouses and stock quantities

▪ Set selling prices, even for specific branched or individual customers
▪ Manually maintain standard costs or automatically determine weighted average costs
▪ Other features include: allowing the invoicing, pricing and costing of dummy service or stock items
without recording them, maintaining maximum and minimum stock level quantities and unlimited
user-defined field specific to each inventory category for additional important information required to
be stored item

Sales & Distribution

▪ Enter and maintain customer orders and reference back to the order numbers
▪ Invoice orders directly with little or no additional input
▪ Give the user information and options on inventory location
▪ Present a full analysis of outstanding balance and aging of receivables
▪ Other features include: showing transactions settled at any given month or outstanding transactions,
calculating discounts across a range of products, viewing sequence of invoices, credit notes & receipts
entered in the transaction inquiries & processing collection applied to specific invoice.

Purchasing

▪ Covers complete procurement cycle from PO generation to goods receiving

▪ Show comprehensive subsidiary ledger on supplier’s account
▪ Show an aged listing of accounts payable balances
▪ Enable payment run to create payment transactions

And other modules for the day-to-day business activities.

User Info
Displays the information of user’s profile (user name and ID, options to change password and logout).

Status Bar
The status bar extends along the entire lower edge of the Smartbooks main window and contains various fields.
The lower left-most portion of the status bar displays the following type of messages:

1. error message
Appears on a red background and informs you that the procedure cannot continue until corrective action is taken.
2. information message
Appears on a blue background and informs you about the issue.

3. confirmation message
Appears on a green background and confirms the successful execution of a procedure.

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Quick Guide on Smartbooks IT Audit with Analytics

System Date & Time

This is the current time and date that the Smartbooks system keeps track of so that transactions will be recorded
timely and accurately.

Operation Modes in Smartbooks

FIELD USAGE
Copy From Copy records from another module to current module
Preview Preview the record in pdf, excel, or crystal report viewer
First Navigate to first recorded document
Previous Navigate to previously recorded document
Next Navigate to next recorded document
Last Navigate to last recorded document
Add Add a new record / document
New Open a new document to make a new transaction
Update Modify the data of an existing record / document

Functions in a Form
These functions provide you with extensive support in searching for objects.

1. Document Link
This function is normally linked with the master data and documents. Using it will open the detailed information.

2. Selection List
While entering data into a document, user can easily look-up for customer/supplier data, or item data using this
button, or simply place your cursor on the field which has SL button and then press Tab key.

Customize User Credentials

For a more personalize experience when using the system, you can change your user name and password in
Smartbooks.

1. Go to Administration module
2. Setup
3. Click on Define Users. User Listing will appear on your window.
4. On the list of users, click your student account
5. Click edit. User Profile will appear on your window.

6. Take note that User ID is not editable. This is what you use in logging in.
7. On the User Name field, input your name.

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Quick Guide on Smartbooks IT Audit with Analytics
8.
9. On the Password field, input your preferred new password.
10. Repeat your new password on the re-enter password field.
11. Click Update.

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Exercises
For exercises regarding Basic Navigation and Terminologies, refer to Exercise 1.1 to 1.2 of the Exercise
Workbook.

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Quick Guide on Smartbooks IT Audit with Analytics

Chapter 3: Introduction to Information Technology Audit

At the end of this chapter, students will be able to:

• Explain Information Technology (IT) Audit and other related terminologies
• Compare and Differentiate IT Audit, Financial Statement Audit, and Compliance
Audit

What is an Information Technology (IT) Audit?

✓ IT audit is the examination and evaluation of an organization's information technology
infrastructure, policies and operations. Information technology audits determine whether IT controls
protect corporate assets, ensure data integrity and are aligned with the business's overall goals. IT
auditors examine not only physical security controls, but also overall business and financial controls
that involve information technology systems.

✓ It can also be defined as any audit that encompasses review and evaluation of automated information
processing systems, related non-automated processes and the interfaces among them.

IT Audit Objectives
Because operations at modern companies are increasingly computerized, IT audits are used to ensure
information-related controls and processes are working properly. The primary objectives of an IT audit include:

✓ Evaluate the systems and processes in place that secure company data.

✓ Determine risks to a company's information assets, and help identify methods to minimize those risks.

✓ Substantiating that the internal controls exist and are functioning as expected to minimize business
risk.

✓ Ensure information management processes are in compliance with IT-specific laws, policies
and standards.

✓ Determine inefficiencies in IT systems and associated management.

IT Audit vs. Financial Statement Audit and Compliance Audit

IT Audit is not about ordinary accounting controls or traditional financial auditing. The use of computers in
accounting systems introduced a new source of risk associated with accounting processes and information
(i.e., data). And, it introduced the need for those who understand this new “thing” to identify and mitigate
the risk. Financial Audit is focused on gathering data to ensure to ensure that the company’s financial
statements are free from material misstatements. On the other hand, IT audit is the examination and
e v a l u a t i o n of an organization's information technology infrastructure, policies and operations.
Information technology audits determine whether IT c o n t r o l s protect c o r p o r a t e a s s e t s , e n s u r e
data i n t e g r i t y and are a l i g n e d w i t h t h e business's overall goals. IT Audit is just a part of the
overarching process of the Financial Audit.

IT auditing is also not compliance testing. Some believe IT auditors are about making sure people conform
to some set of rules—implicit or explicit—and that what we do is report on exceptions to the rules. Actually,
that is management’s job. It is not the compliance with rules that is of interest to IT auditors. IT auditors are

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Quick Guide on Smartbooks IT Audit with Analytics
examining whether the entity’s
relevant systems or business processes for achieving and monitoring compliance are effective. IT auditors also
assess the design effectiveness of the rules—whether they are suitably designed or sufficient in scope to
properly mitigate the target risk or meet the intended objective.

Compliance failures are important to IT auditors, but for reasons beyond the keeping of rules. A compliance
failure can be, and often is, the symptom of a bigger problem related to some risk factor and/or control, such
as a defective system or business process, that can or does adversely affect the entity. Thus, to the IT auditor,
compliance failures are much more about risk (ultimately) than the rules themselves.

It is also passé to automatically or casually consider IT considerations of an audit to be out of scope because it
is not explicitly related to some stated requirement, or to consider an audit to be a waste of time. The fact is
IT can and does adversely affect business processes or financial data in ways of which management may not
be adequately aware.

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Quick Guide on Smartbooks IT Audit with Analytics

Chapter 4: IT Audit Process

At the end of this chapter, students will be able to:
• Explain and understand the IT Audit process
• Understand the Four Phases of an IT Audit

1. Planning the Audit Schedule

A key part of a good process is having an overall Audit Schedule that is readily available to let everyone
know when each process will be audited over the upcoming cycle (usually a yearly schedule). If you were
not to have a plan and went with surprise audits, the message that is given from senior management
is “We don’t trust our employees.” By publishing the audit intentions, the message is that this is meant
as a support to the process owners and the auditors are there to help. This can allow the process owners
to time the finish of any improvement projects that they are working on to be before the audit, so that
they can gather valuable information on the implementation, or to request the auditors to focus on
helping to gather information for other planned improvements.

2. Planning the Process Audit

The first step in planning the individual process audits is to confirm with the process owners when the
audit will take place. The overall plan above is more of a guideline as to how often processes will be
audited, and roughly when, but the confirmation allows the auditor and process owner to collaborate
to determine the best time to review the process. This is when the auditor can review previous audits
to see if any follow-up is required on comments or concerns previously found, and when the process
owner can identify any areas that the auditor can look at to assist the process owner to identify
information. A good audit plan can make sure that the process owner will get value out of the audit
process.

Planning the IT audit involves two major steps. The first step is to gather information and do some
planning the second step is to gain an understanding of the existing internal control structure. More and
more organizations are moving to a risk-based audit approach which is used to assess risk and helps an
IT auditor make the decision as to whether to perform compliance testing or substantive testing. In a
risk-based approach, IT auditors are relying on internal and operational controls as well as the
knowledge of the company or the business. This type of risk assessment decision can help relate the
cost-benefit analysis of the control to the known risk. In the “Gathering Information” step the IT auditor
needs to identify five items:

a. Knowledge of business and industry

b. Prior year’s audit results
c. Recent financial information
d. Regulatory statutes
e. Inherent risk assessments

A side note on “Inherent risks,” is to define it as the risk that an error exists that could be material or
significant when combined with other errors encountered during the audit, assuming there are no
related compensating controls. As an example, complex database updates are more likely to be

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Quick Guide on Smartbooks IT Audit with Analytics
miswritten than simple ones, and thumb
drives are more likely to be stolen (misappropriated) than blade servers in a server cabinet. Inherent
risks exist independent of the audit and can occur because of the nature of the business.

In the “Gain an Understanding of the Existing Internal Control Structure” step, the IT auditor needs to
identify five other areas/items:

a. Control Environment
b. Control Procedures
c. Detection Risk Assessment
d. Control Risk Assessment
e. Equate Total Risk

Once the IT auditor has “Gathered Information” and “Understands the Control” then they are ready to
begin the planning, or selection of areas, to be audited. Remember one of the key pieces of
information that you will need in the initial steps is a current Business Impact Analysis (BIA), to assist you
in selecting the application which support the most critical or sensitive business functions.

3. Conducting the Audit

An audit should start with a meeting of the process owner to make sure that the audit plan is complete
and ready. Then there are many avenues for the auditor to gather information during the audit:
reviewing records, talking to employees, analyzing key process data or even observing the process
in action. The focus of this activity is to gather evidence that the process is functioning as planned in
the QMS, and is effective in producing the required results. One of the most valuable things that an
auditor can do for a process owner is not only to identify areas that do not have evidence that they are
functioning properly, but also to point out areas of a process that may function better if changes are
made.

4. Reporting on the Audit

A closing meeting with the process owner is a necessity to ensure that the flow of information is not
delayed. The process owner will want to know if there are any areas of weakness that need to be
addressed, but will also be interested in knowing if any areas exist that might be improved. This
should be followed with a written record as soon as possible to provide the information in a more
permanent format to enable follow-up of the information. By identifying not only the non-conforming
areas of the process, but also the positive areas and potential improvement areas, the process owner
will get a better value from the Internal Audit, which will allow for process improvements.

5. Follow-up on Issues or Improvements Found

As with many areas of the standard, follow-up is a critical step. If problems have been found and
corrective actions taken, making sure that the problem is actually fixed is a key part of fixing it. If
improvement projects have been completed from opportunities identified in the audit, then seeing how
much the process has improved is a great motivator for future improvements.

Overview of the Four (4) Phases of an IT Audit

The IT audit is generally divided into three phases: audit planning, tests of controls, and substantive testing.

1. Audit Planning

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The first step in the IT audit is audit
planning. Before the auditor can determine the nature and extent of the tests to perform, he or she
must gain a business. A major part of this phase of the audit is the analysis of audit risk. The objective
of the auditor is to obtain sufficient information about the firm to plan the other phases of the audit.
The risk analysis incorporates an overview of the organization’s internal controls. During the review of
controls, the auditor attempts to understand the organization’s policies, practices, and structure. In
this phase of the audit, the auditor also identifies the financial attempts to understand the controls
over the primary transactions that are processed by these applications.

The techniques for gathering evidence at this phase include questionnaires, interviewing management,
reviewing systems documentation, and observing activities. During this process, the IT auditor must
identify the principal exposures and the controls that attempt to reduce these exposures. Having done
so, the auditor proceeds to the next phase, where he or she tests t controls for compliance with pre-
established standards.

2. Tests of Controls

The objective of the tests of controls phase is to determine whether adequate internal controls are in
place and functioning properly. To accomplish this, the auditor performs various tests of controls.
The evidence gathering techniques used in this phase may include both manual techniques and
specialized computer audit techniques.

At the conclusion of the tests controls phase, the auditor must assess the quality of internal
controls. The degree of reliance the auditor can ascribe to internal controls affects the nature and
extent of substantive testing that needs to be performed.

3. Substantive Testing

The third phase of the audit process focuses on financial data. This involves a detailed investigation of
specific account balances and transactions through what are called substantive tests. For example,
a customer confirmation is a substantive test sometimes used to verify account balances. The auditor
selects a sample of accounts receivable balances and traces these back to their source – the customers-
to determine if the amount stated is in fact owed by a bona fide customer. By doing so, the auditor
can verify the accuracy of each account in the sample. Based on such sample findings, the
auditor is able to draw conclusions about the fair value of the entire accounts receivable asset.

Some substantive tests are physical, labor-intensive activities such as counting cash, counting
inventories in the warehouse, and verifying the existence of stock certificates in a safe. In an IT
environment, the information needed to perform substantive tests (such as account balances and
names and addresses of individual customers) is contained in data files that often must be
extracted using Computer Assisted Audit Tools and Techniques (CAATTs) software.

4. Audit Report

What’s included in the audit documentation and what does the IT auditor need to do once their audit
is finished. Here’s the laundry list of what should be included in your audit documentation:

✓ Planning and preparation of the audit scope and objectives

✓ Description and/or walkthroughs on the scoped audit area
✓ Audit program
✓ Audit steps performed and audit evidence gathered

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✓ Whether services of other
auditors and experts were used and their contributions
✓ Audit findings, conclusions and recommendations
✓ Audit documentation relation with document identification and dates (your cross-
reference of evidence to audit step)
✓ A copy of the report issued as a result of the audit work
✓ Evidence of audit supervisory review

When you communicate the audit results to the organization it will typically be done at an exit
interview where you will have the opportunity to discuss with management any findings and
recommendations. You need to be absolutely certain of:

✓ The facts presented in the report are correct

✓ The recommendations are realistic and cost-effective, or alternatives have been
negotiated with the organization’s management
✓ The recommended implementation dates will be agreed to for the recommendations you
have in your report.

Your presentation at this exit interview will include a high-level executive summary (as Sgt. Friday use
to say, just the facts please, just the facts). And for whatever reason, a picture is worth a thousand
words so do some PowerPoint slides or graphics in your report.

Your audit report should be structured so that it includes:

✓ An introduction (executive summary)

✓ The findings are in a separate section and grouped by intended recipient
✓ Your overall conclusion and opinion on the adequacy of controls examined and any
identified potential risks
✓ Any reservations or qualifications with respect to the audit
✓ Detailed findings and recommendations

Finally, there are a few other considerations which you need to be cognizant of when preparing and
presenting your final report. Who is the audience? If the report is going to the audit committee, they
may not need to see the minutia that goes into the local business unit report. You will need to identify
the organizational, professional and governmental criteria applied such as GAO-Yellow Book, CobiT
or NIST SP 800-53. Your report will want to be timely so as to encourage prompt corrective action.

And as a final, final parting comment, if during the course of an IT audit, you come across a materially
significant finding, it should be communicated to management immediately, not at the end of the audit.

Exercises

For exercises regarding Introduction to IT Audit, refer to Exercise 3.1 of the Exercise Workbook.

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Chapter 4: Test of Controls

At the end of this chapter, students will be able to:

• Explain and understand the internal control, modifying assumptions, and its
components
• Perform different test of controls on the client’s ERP System
•

What is an Internal Control?

Internal Control is being defined as a process for assuring of an organization’s objectives in operational
effectiveness and efficiency, reliable financial reporting, and compliance with laws, regulations and policies.

Internal Controls are also the mechanisms, rules, and procedures implemented by a company to ensure the
integrity of financial and accounting information, promote accountability and prevent fraud.

Objectives of Internal Control

The internal control system comprises policies, practices, and procedures employed by the organization
to achieve four broad objectives:

1. To safeguard assets of the firm.

2. To ensure accuracy and reliability of accounting records and information.
3. To promote efficiency in the firm’s operations.
4. To measure compliance with management’s prescribed policies and procedures.

The internal control system serves as a shield that protects the firm’s assets from numerous undesirable events
that bombard the organization. These include attempts at unauthorized access to the firm’s assets (including
information), fraud perpetrated by persons both in and outside the firm, errors due to employee
incompetence, faulty computer programs, and corrupted input data, and mischievous acts such as
unauthorized access by computer hackers and threats from computer viruses that destroy programs and
database.

A weakness in internal control may expose the firm to one or more of the following types of risks:

1. Destruction of assets (both physical assets and information)

2. Theft of assets
3. Corruption of information or the information system
4. Disruption of the information system

Modifying Assumptions
Inherent in these control objectives are four modifying assumptions that guide designers and auditors of
internal control systems.
1. Management Responsibility
This concept holds that the establishment and maintenance of a system of internal control is a
management responsibility.

2. Reasonable Assurance

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The internal control system should
provide Reasonable assurance that the four broad objectives of internal control are met. This means
that no system of internal control is perfect and the cost of achieving improved control should not
outweigh its benefits.

3. Methods of Data Processing

The internal control system should achieve the four broad objectives regardless of the data processing
method used. However, the techniques used to achieve these objectives will vary with different types
of technology.

4. Limitations
Every system of internal control has limitations on its effectiveness. These include (1) the possibility of
error – no system is perfect, (2) circumvention – personnel may circumvent the system through
collusion or other means, (3) management override – management is in a position to override control
procedures by personally distorting transactions or by directing a subordinate to do so, and (4)
changing conditions – conditions may change over time so that existing controls may become
ineffectual.

Five Components of Internal Control (CRIME)

1. Control Environment
The control environment is the foundation for the other four control components. The control
environment sets the tone for the organization and influences the control awareness of its management
and employees.

2. Risk Assessment
Organizations must perform a risk assessment to identify, analyze, and manage risks relevant to financial
reporting. Risks can arise out of changes in circumstances such as:
✓ Changes in the operating environment that impose new competitive pressures on the firm.
✓ New personnel who possess a different or inadequate understanding of internal control.
✓ New or reengineered information systems that affect transaction processing.
✓ Significant or rapid growth that strains existing internal controls.
✓ The implementation of new technology into the production process or information system that
impacts transaction processing.

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3. Information and Communication

The accounting information system consists of the records and methods used to initiate, identify,
analyze, classify, and record the organization’s transactions and to account for the related assets and
liabilities. The quality of information generated by the AIS impacts management’s ability to take
actions and make decisions in connection with the organization’s operations and to prepare reliable
financial statements. An effective accounting system will:

✓ Identify and record all valid financial transactions.

✓ Provide timely information about transactions in sufficient detail to permit proper
classification and financial reporting.
✓ Accurately measure the financial value of transactions so their effects can be recorded in
financial statements.
✓ Accurately record transaction in the time period in which they occurred.

SAS 78 requires that auditors obtain sufficient knowledge of the organization’s information system to
understand:

✓ The classes of transactions that are material to the financial statements and how those
transactions are initiated.
✓ The accounting records and accounts that are used in the processing of material
transactions.
✓ The transaction processing steps involved from the initiation of an economic event to its
inclusion in the financial statements.
✓ The financial reporting process used to prepare financial statements, disclosures, and
accounting estimates.

4. Monitoring

Management must determine that internal controls are functioning as intended. Monitoring is the
process by which the quality of internal control design and operation can be assessed. This may be
accomplished by separate procedures or by ongoing activities.

An organization’s internal auditors may monitor the entity’s activities in separate procedures. They
gather evidence of control adequacy by testing controls, and then communicate control strengths and
weaknesses to management. As part of this process, internal auditors make specific recommendations
for improvement to controls.

Ongoing monitoring may be achieved by integrating special computer modules into the information
system that capture key data and/or permit tests of controls to be conducted as part of routine
operations.

Another technique for achieving ongoing monitoring is the judicious use of management reports.
Timely reports allow managers in functional areas such as sales, purchasing, production, and cash
disbursements to oversee and control their operations. By summarizing activities, highlighting
trends, and identifying exceptions from formal performance, well-designed management reports
provide evidence of internal control function or malfunction.

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5. Control Activities
Control activities are the policies and procedures used to ensure that appropriate actions are taken to
deal with the organization’s identified risks. Control activities can be grouped into two distinct
categories: computer controls and physical controls. The focus of this module is on the former.

Physical Controls - This class of control activities relates primarily to traditional accounting systems
that employ manual procedures. However, an understanding of these control concepts also gives
insights to the risks and control concerns associated with the IT environment. There are six traditional
categories of Physical Control Activities.

Transaction Authorization - The purpose of transaction authorization is to ensure that all material
transactions processed by the information system are valid and in accordance with management’s
objectives. Authorizations may be general or specific. General authority is granted to operations
personnel to perform day-to- day operations. An example of general authorization is the procedure to
authorize the purchase of inventories from a designated vendor only when inventory levels fall
to their predetermined reorder points. This is called a programmed procedure (not necessarily in
the computer sense of the word). The decision rules are specified in advance, and no additional
approvals are required.

On the other hand, specific authorizations deal with case-by-case decisions associated with non-
routine transactions. An example of this is the decision to extend a particular customer’s credit limit
beyond the normal amount. Specific authority is usually a management responsibility.

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ACTIVITY 1: Transaction Authorization

Lukas Ibarra is the Sales Officer of the company. He is authorized to perform sales-related transactions in the
system.

Perform transaction with a programmed procedure

Open Smartbooks
• RU Laptops, Co. is the company being audited.
• Enter the User ID: Lukas Password: 12345

Note: Use the user account of Lukas Ibarra to have the proper authorizations for the transaction to be made.

Create a Sales Order

• Navigate to Sales > Sales Order.
• In the Customer field, click the Selection List button, choose C1000 Jacob Electronics.
• In the Item Code, click the Selection List Button, choose L1000 Lenovo Laptops in the
Item List with the Quantity of 20 and price of Php28,000.
• Click ‘Save’.

Create a Shipment (Delivery)

• Navigate to Sales > Shipment.
• In the Customer field, click the Selection List button, choose C1000 Jacob Electronics.
• Click the Copy From button, then select Sales Order.
• List of Sales Order window will pop-up, tick the checkbox of the sales order being
copied, then another List of Sales Order window will pop-up, click ‘Finish’.
• After all the items are copied, click ‘Save’.
A system message will appear, click OK. An error should occur, “Stock quantity is negative”.

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Suggested Answer:

The negative stock quantity error is a system’s control to ensure that the delivery of items that
could not be available at the moment is not allowed.

Exercises

For exercises regarding Transaction Authorization, refer to Exercise 4.1 of the Exercise Workbook.

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ACTIVITY 2: Transaction Authorization

Karla Sy is the Purchase Officer of the company. She is authorized to perform purchase-related transactions
in the system.

You found out in the Company policies that no Purchase Order amounting to more than P250,000 shall be
allowed to be posted without the approval of the manager first. Test this kind of control in the system.

Perform transaction with a programmed procedure

• Enter the User ID: Karla Password: 12345

Note: Use the user account of Karla Sy to have the proper authorizations for the transaction to be made.

Create a Purchase Order

• Navigate to Purchases > Purchase Order.
• In the Supplier field, click the Selection List button, choose V1000 - Laptop Queen
Philippines, Inc.
• In the Item Code, click the Selection List Button, choose L1000 - Lenovo Laptops in the
Item List with the Quantity of 10 and price of P27,000.
• Click ‘Add’.
• Click ‘Save’.
• System message will appear, input remarks, ‘For customers’ demand’.
• Click ‘OK’.

Suggested Answer:

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Based on the internal policy of the company, approval of the manager is needed for purchases
greater than Php250,000.00.

Exercises

For exercises regarding Transaction Authorization, refer to Exercise 4.2 of the Exercise Workbook.

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ACTIVITY 3: Segregation of duties

Business Process Segregation

Upon reading the Organization Chart, you found out that Lukas Ibarra is designated as a Sales Officer, so he
should be able the work on the documents that are related to Sales. While for other documents such as those
relating to Purchasing, he should not have authorization to open it. Test the segregation of duties as defined
in the Authorization Table.

Log in to the account of manager to view the authorizations made for Lukas Ibarra.
• Enter the User ID: manager Password: 1234

View the authorizations of Lukas Ibarra

• Navigate to Admin > System Configuration > Authorization > User Authorization.
• In the User Name, click dropdown list and select Lukas Ibarra.
• You can see that he has Full Access in Sales but No Access/Read Access in Purchases.

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Test the Segregation of Duties by checking if the Authorizations are functioning properly.
Log in to Lukas’ account.
Enter the User ID: Lukas Password: 12345

Test the Sales Order document

• Go to Sales > Sales Order.
• In the Customer field, click the Selection List button, choose C1000 Jacob Electronics.
• In the Item Code, click the Selection List Button, choose L1000 Lenovo Laptops in the Item
List with the Quantity of 10 and price of P28,000.
• Click Save.

Since he has authorization for Sales, he should be able to open it and input data in the sales order
fields.

Test the Purchase Order document

• Go to Purchases > Purchase Order.

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Since he has no authorization for Purchasing, he should not be permitted to add or edit the
purchase order fields, only viewing is available.

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Suggested Answer:

Test of segregation of incompatible duties are performed in Smartbooks by series of tests like this.
Data ownership authorization is pre-assigned by the system administrators who have superuser
accounts.

Exercises
For exercises regarding Segregation of duties, refer to Exercise 4.3 of the Exercise Workbook.

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ACTIVITY 4: Accounting Records

Identify which document in Smartbooks can give simple audit trail.
Log in to Auditor’s account.
• Enter the User ID: auditor Password: 12345

View document trail on marketing documents

• Go to Sales > Invoice.
• On the lower part of the interface, click ‘Find’.
• List of documents window will appear, select any document.
• Click ‘Ok’.
The Notes field indicates the basis documents of the invoice (i.e. Sales Order and Delivery).

View the accounting entry for every document

• Go to the Accounting Tab and click the document link button beside Journal Entry.

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• System-generated journal entry
window will pop-up.

Generate the following reports in Smartbooks.

1. General Journal
• Go to Financials > Reports > Journal Entry List.

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2. Special Journals
2.1 AP Voucher
• Go to Purchases > Reports > AP Voucher List.
• Change the default Status from ‘Open’ to ‘All’ to view all existing AP Vouchers.
• Click ‘Search’.

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2.2 Invoice
• Go to Sales > Reports > Invoice List.
• Change the default Status from ‘Open’ to ‘All’ to view all existing invoices.
• Click ‘Search’.

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2.3 Cash/Check Receipts

• Go to Treasury > Reports > Cash Inflows List – Customer.
• Change the default Status from ‘Open’ to ‘All’ to view all existing cash inflows from
customers.
• Click ‘Search’.

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2.4 Cash/Check Disbursements

• Go to Treasury > Reports > Cash Outflows List – Supplier.
• Change the default Status from ‘Open’ to ‘All’ to view all existing cash outflows to
suppliers.
• Click ‘Search’.

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3. General Ledger
• Go to Financials > Reports > General Ledger.
• Click the selection list button and pop-up window will appear, select the specific G/L Account
you want to generate (e.g. 10120102 Metrobank Account No. 9021).
• Click ‘OK’.
• Change the date from 01/01/2021 to 12/31/2021.
• Click ‘Preview’.
• Report Layout List window will pop-up, choose Details, then click ‘Select’.

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4. Subsidiary Ledger
• Go to Financials > Reports > Subsidiary Ledger Report.

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• Change the date from 01/01/2021 to
12/31/2021.
• Click ‘Preview’.
• Report Layout List window will pop-up, choose ‘Summary’, then click ‘Select’.

5. Trial Balance
• Go to Financials > Reports > Trial Balance.
• Change the date to 12/31/2021.
• Click ‘Preview’.
• Report Layout List window will pop-up, click ‘Select’.

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• Trial Balance window will appear.

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6. Financial Statements
6.1 Balance Sheet
• Go to Financials > Reports > Trial Balance.
• Change the date to 12/31/2021.
• Click ‘Preview’.
• Report Layout List window will pop-up, click ‘Select’.

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6.2 Profit or Loss

• Go to Financials > Reports > Profit or Loss.
• Change the date from 01/01/2021 to 12/31/2021.
• Click ‘Preview’.
• Report Layout List window will pop-up, click ‘Select’.

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Exercises

For exercises regarding Accounting Records, refer to Exercise 4.4 of the Exercise Workbook.

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ACTIVITY 5: Source Document Controls

➢ View the list of a particular document to identify if there is any document missing by double checking the
numbering of source documents.
➢ Double check if the source documents numbers were used in correct sequence.

Log in to Auditor’s account.

• Enter the User ID: auditor Password: 12345

See the list of a particular document e.g. Sales Order

• Go to Sales > Reports > Sales Order List.
• Change the default Status from ‘Open’ to ‘All’ to view all existing Sales Orders.
• Click ‘Search’.
• Double check the sequence of document numbers.

Do the same process when checking other documents.

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Suggested Answer:

The test is performed to find irregularities on the numbering series of the system. Since Marketing
Documents (e.g. Sales Order, Invoices) are system generated we can assume that the series is in
order but if there are irregularities, we need to investigate it further.

Exercises

For exercises regarding Source Document Control, refer to Exercise 4.5 of the Exercise Workbook

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ACTIVITY 6: Data Coding
Controls
According to the company policy, all customer and supplier codes should have the same interval and all customer
codes should start with ‘C’ while vendor codes should start with ‘V’. View the list of customers and suppliers and
examine if the codes used were according to the company policy.

View customers list

• Go to Customers/Suppliers > Reports > Customer List.

View suppliers list

• Go to Customers/Suppliers > Reports > Supplier List.

Suggested Answer:

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The test is performed to find irregularities on the customer accounts. Customers with the same
Code can be considered as an irregularity as well as Customers with an identical Name. Also, we
should look to the normal balance of the accounts, negative balances, or even unusual large
balances.

Exercises
For exercises regarding Data Coding Controls, refer to Exercise 4.6 of the Exercise Workbook.

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ACTIVITY 7: Field Integration

1. Missing Data Checks

Test if marketing documents in Smartbooks has this control. (Note: Use Lukas account)

Log in to Lukas’ account.

• Enter the User ID: Lukas Password: 12345

• Open Sales Order.

Go to Sales > Sales Order.
• Insert the following Information in the Sales Order:
▪ Customer: C1000
▪ Name: Jacob Electronics
▪ Item No.: D1000
▪ Unit Price: PhP 32,000
▪ Manually remove the delivery date.
▪ Click ‘Save’.

Smartbooks should flag an error message due to missing delivery date. You can test other documents for this
control.

2. Numeric-alphabetic Data Checks

Test if marketing documents in Smartbooks has this control. (Note: Use Lukas account)

Log in to Lukas’ account.

• Enter the User ID: Lukas Password: 12345

• Open Sales Order

• Go to Sales > Sales Order

• Insert the following Information in the Sales Order:
▪ Customer: C1000

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▪ Name: Jacob Electronics
▪ Delivery date: Default system date
▪ Item No.: D1000
▪ Quantity: ABC

Smartbooks should flag an error message due to invalid quantity. You can test other documents for this control.

3. Validity Checks
Test if Business Partner Master Data has this control. (Use Lukas’ account)

Log in to Lukas’ account.

• Enter the User ID: Lukas Password: 12345

• Go to Sales > Sales Order.

• In the Customer field, type ‘L1100’.

Smartbooks should flag an error message due to invalid customer number. You can test other documents for this
control.

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4. Limit Checks
Test if creating a Customer account in Smartbooks has this control. (Use Manager’s Account)

Log in to Manager’s account.

• Enter the User ID: manager Password: 1234

• Go to Customers/Suppliers > Customers

• Change the Customer No. type from ‘Primary’ to ‘Manual’
• Input a code, for example ‘CUSTOMER 10’.

A system message will pop-up that only 10 characters are allowed.

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Suggested Answers:

A. Delivery Date is required.

B. Incorrect numeric value entered.

C. Invalid Customer No.

D. Input value that exceeded permitted number of character.

Exercises

For exercises regarding Field Integration, refer to Exercise 4.7 of the Exercise Workbook.

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ACTIVITY 8: Audit Trail Controls

View some techniques used to preserve audit trails in Smartbooks.
Transaction Logs

Every transaction successfully processed by the system should be recorded on a transaction log, which serves
as a journal.

View a list of specific transactions posted in Smartbooks or generate transaction log. (Use Auditor’s Account)

Log in to Auditor’s account.

• Enter the User ID: Auditor Password: 12345

• Go to Financials > Reports > Journal Entry List.

• Change the default Status from ‘All’ to ‘A/R Invoices’ to view all existing invoices.
• Click ‘Search’.
• Double click the transaction you want to open to view the system-generated journal entry.

Each transaction should have a unique document number.

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Listing of Automatic Transactions
Some transactions are triggered internally by the system. To maintain control over automatic
transactions processed by the system, the responsible end user should receive a detailed listing of
all internally generated transactions.

Unique Transaction Identifiers

Each transaction processed by the system must be uniquely identified with a transaction number.
This is the only practical means of tracing a particular transaction through a database of thousands
or even millions of records.

The original transaction is navigated when the document link button is clicked.
• Go to Financials > Reports > Journal Entry List
• Double click the document you want to open
• Journal Entry will open. Click the document link button to open the original transaction.

These are just some of the transactions legend:

MAIN-AR A/R Invoice
MAIN-AP A/P Invoice
MAIN-OR Receipts
MAIN-PV Payments
MAIN-PDN Goods Receipts PO
MAIN-DN Deliveries
MAIN-JV Journal Voucher
MAIN-DP Bank Deposit

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Exercises

For exercises regarding Audit Trail Controls, refer to Exercise 4.8 of the Exercise Workbook.

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Quick Guide on Smartbooks IT Audit with Analytics

Chapter 5: Substantive Tests

At the end of this chapter, students will be able to:

• Explain and understand the substantive procedures on revenue cycle, expenditure
cycle, other financial statement accounts
• Perform different substantive tests on the client’s ERP System

What is Substantive Procedure?

Substantive Procedure is an audit procedure designed to detect material misstatements at the assertion level.
Substantive Procedures comprise:

i. Tests of Details (of classes of transactions, account balances, and disclosures), and

ii. Substantive Analytical Procedures

Substantive Tests of Revenue Cycle

Revenue Cycle Risks and Audit Concerns (What could go wrong?)

In general, the auditor’s concerns in the revenue cycle pertain to the potential for overstatement of
revenues and accounts receivable rather than their understatement. Overstatement of accounts can result
from material errors in the processing of normal transactions that occur throughout the year. In addition, the
auditor should focus attention on large and unusual t r a n s a c t io n s at or near period-end.

Testing the Accuracy and Completeness Assertions

Accuracy assertion pertains to management assertions that all transactions were recorded at the appropriate
amount while completeness assertion says that all transactions that should have been recorded have
been recorded. In the Revenue Cycle audit, accuracy and completeness assertions states that all sales
transactions were recorded accurately and completely

Review Sales Documents and Balances for Unusual Trends and Exceptions

A useful audit procedure for identifying potential audit risks involves scanning data files for unusual transactions
and account balances. For example, scanning accounts receivable for excessively large balances may indicate
that the company’s credit policy is being improperly applied.

Review Sales Invoices and Customer Master Data for Missing and Duplicate Items

Searching for missing and/or duplicate transactions and data entries is another important test that helps
the auditor corroborate or refute the completeness and accuracy assertions. Duplicate and missing
transactions in the revenue cycle may be evidence of over or understated sales and accounts receivable.

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Quick Guide on Smartbooks IT Audit with Analytics
ACTIVITY 9: Review Sales
Document Balances for Unusual Trends and Exceptions
A. Review Sales Documents and Balances for Unusual Trends and Exceptions

Log in to Manager’s account.

• Enter the User ID: Manager Password: 1234

• Go to Tools > SQL Query

• On the SQL Query field, type ‘Show tables’ to show all the tables available and get the table name.
• Click ‘Execute’.
• All the tables on the database will appear.
• Look for the table you want to generate, for example, Sales Order, the table name is ‘salesorders’.
• On the SQL Query field, manually type the query:

SELECT * FROM SALESORDERS

• Click ‘Execute’.
• All details regarding Sales Orders will appear.

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Generate an Ad hoc Sales Report

Hint: Get the column name from the Sales Orders previously generated to specify on the next query.

Generate a report where only the Document Number, Document Date, BP Code, BP Name, and Total Amount
are shown. Sort the data in ascending order according to total amount.

To generate an ad hoc report,

• On the SQL Query field, manually type the query:
SELECT DOCNO, DOCDATE, BPCODE, BPNAME, TOTALAMOUNT FROM SALESORDERS
ORDER BY TOTALAMOUNT ASC
• Click ‘Execute’.
• All the details on the specified columns will appear.

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Now you can examine all the Sales Order and scan for any unusual items. For example, a Sales Order amounting
to Php 896,000 was executed at December 31, 2021 which is considered as a holiday in the Philippines. Also, the
amount is unusually large as compared with other sales order. The auditor should inquire this to the management
of the company and seek for additional information.

You can do the same procedures for other Sales documents. You just need to know the appropriate Table
Name.

(Tip: To get a list of Smartbooks documents and their equivalent table names, type ‘show tables’ on the query
field then click Execute.)

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B. Review customer balances for unusual trends and exceptions

Log in to Manager’s account.

• Enter the User ID: Manager Password: 1234

• Go to Tools > SQL Query

• On the SQL Query field, type ‘Show tables’ to show all the tables available and get the table name.
• Click ‘Execute’.
• All the tables on the database will appear.
• Look for the table you want to generate, for example, Customers, the table name is ‘customers’.
• On the SQL Query field, manually type the query:

SELECT * FROM CUSTOMERS

• Click ‘Execute’.
• All details regarding Customers will appear.

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Generate an Ad hoc Customer Report

Hint: Get the column name from the Customer report previously generated to specify on the next query.

Generate a report where only the Customer Number, Customer Name, and Balance are shown. Generate
Customer Group 1 only (customers with transactions).

To generate an ad hoc report,

• On the SQL Query field, manually type the query:
SELECT CUSTNO, CUSTNAME, BALANCE FROM CUSTOMERS
WHERE CUSTGROUP = 1
• Click ‘Execute’.
• All the details on the specified columns will appear.

You can see here that Lappy Trading has a negative balance.

To view the movement of transactions in the customer’s account,

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• Go to Customers/Suppliers >
Reports > Customer Ledger
• On the Customer No. field, select the customer with negative balance.
• Change the Journal Date from ‘01/01/2021 to 12/31/2021’.
• Click ‘Search’.
• Customer transactions will appear, click the document link button of the last payment
made.
• Cash Inflows – Customer window will appear and transaction made may now be checked.

Upon examination of the list of customers and their balances, you noticed that the balance of Lappy
Trading is negative. This is unusual considering that customer balances are normally debit or positive.
The auditor can investigate further this exception. List your finding below and propose an adjusting
entry:
__________________________________________________________________________________
__________________________________________________________________________________

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_________________________________________________________________________________

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C. Review List of Customers for any duplicate items

Log in to Manager’s account.

• Enter the User ID: Manager Password: 1234
•
Generate the list of customers to view the details.
• Go to Customers/Suppliers > Reports > Customer List
• Double click each item to view the details of each customer.

You may now review if these customers are the same.

As you scan the list of business partners, some of the customer names look familiar. You can further
investigate this issue by comparing the master data. Open each customer account on the customer

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list, one for Jacob Electrics and
one for Jacob Electronics. Do the same for the other two then list your finding here:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

Exercises
For exercises regarding Review Sales Document Balances for Unusual Trends and Exceptions, refer to Exercise
5.1a – 5.1b of the Exercise Workbook.

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ACTIVITY 10: Testing the

Valuation and Allocation Assertion

Testing the Valuation and Allocation Assertion

Valuation and Allocation assertion pertains to management assertions that the assets, liabilities
and equity balances are included in the financial statements at appropriate amounts and any
resulting valuation or allocation adjustments are appropriately recorded. For the revenue cycle
audit, valuation and allocation assertion states that the customer balances recorded are in their
proper values.

Aging Accounts Receivable

The auditor’s objective regarding proper valuation and allocation is to corroborate or refute that
accounts receivable are stated at net realizable value, this objective rests on the reasonableness of
the allowance for doubtful accounts, which is derived from aged accounts receivable balances. To
achieve this objective, the auditor needs to review the accounts receivable aging process to
determine that the allowance for doubtful accounts is adequate. As accounts age, the probability
that they will ultimately be collected is decreased. Therefore, as a general rule, the larger the
number of older accounts that are included in an company’s accounts receivable file, the larger the
allowance for doubtful accounts needs to be to reflect the risk.

View the Aging of Accounts Receivable and provide for Allowance for Doubtful Accounts based
on Company’s policies.
Log in to Auditor’s account.
• Enter the User ID: Auditor Password: 12345

• Go to Sales > Reports > Aging

• Change the default branch to ‘Head Office’
• Change the default date to 12/31/2021
• Click Preview. Report Layout List window will appear, choose ‘Details’ then click ‘Select’.
• Aging Report will pop-up.

Now the auditor can perform his analysis based on this aging and compute the appropriate amount
of Allowance for Doubtful Accounts based on the Company’s policies.

Compute the amount of Allowance for Doubtful Accounts. According to the industry experiences, the
collectability of accounts are as follow:

Age of Accounts Receivable Collectability percentage

0-1 month 100%
Over one month not over two months 98%
Over two months not over three months 95%
Over three months 92%

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Exercises

For exercises regarding Testing the Valuation and Allocation Assertions, refer to Exercise 5.2 of the
Exercise Workbook.

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Substantive Tests of
Expenditure Cycle
Expenditure Cycle Risks and Audit Concerns

Taking the most narrow attest-function view, external auditors are concerned primarily with
the potential for understatement of liabilities and related expenses. Substantive tests of expenditure
cycle accounts are therefore directed toward gathering evidence of understatement and omission
of material items rather than their overstatement.

Testing the Accuracy Assertion

Accuracy assertion pertains to management assertions that all transactions were recorded at the
appropriate amount In the Expenditure Cycle audit accuracy states that all expense transactions
were recorded accurately.

Review Purchasing Documents and Balances for Unusual Trends and Exceptions

A useful audit procedure for identifying potential audit risks involves scanning data files for unusual
transactions and account balances. For example, scanning accounts payable for excessively large
balances may indicate abnormal dependency on a particular supplier.

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ACTIVITY 11: Review of
A/P Unusual Trends and Exceptions (Use Auditor’s Account)
Review A/P Invoices Unusual Trends and Exceptions
Log in to Manager’s account.
• Enter the User ID: Manager Password: 1234

• Go to Tools > SQL Query

• On the SQL Query field, type ‘Show tables’ to show all the tables available and get the table
name.
• Click ‘Execute’.
• All the tables on the database will appear.
• Look for the table you want to generate, for example, A/P Invoices, the table name is
‘apinvoices’.
• On the SQL Query field, manually type the query:
SELECT * FROM APINVOICES
• Click ‘Execute’.
• All details regarding A/P Invoices will appear.

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Generate an Ad hoc A/P Invoice Report

Hint: Get the column name from the A/P Invoices previously generated to specify on the next query.

Generate a report where only the Document Number, Document Date, BP Code, BP Name, and Total
Amount are shown. Sort the data in ascending order according to total amount.

To generate an ad hoc report,

• On the SQL Query field, manually type the query:
SELECT DOCNO, DOCDATE, BPCODE, BPNAME, TOTALAMOUNT FROM APINVOICES
ORDER BY TOTALAMOUNT ASC
• Click ‘Execute’.
• All the details on the specified columns will appear.

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You can now examine all the A/P Invoices and scan for any unusual items.

You can do the same procedures for other Purchasing documents. You just need to know the
appropriate Table Name.

Exercises

For exercises regarding Testing the Accuracy Assertions, refer to Exercise 5.3 of the Exercise Workbook.

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ACTIVITY 12: Testing the
Completeness Assertion

Testing the Completeness Assertion

Completeness assertion says that all transactions that should have been recorded have been
recorded. In the Expenditure Cycle audit, completeness declares that all expense transactions were
completely recorded.

Searching for Unrecorded Liabilities

The search for unrecorded liabilities involves matching the records used by the warehouse
department such as a receiving report to indicate receipt of inventory with the billing invoice from
supplier which is used to record liabilities. A receiving report with no matching billing invoice might
indicate that a liability was not recorded.

Examine the documents that are still open that might lead to understatement of accounts.
Scan for any open Receiving document which could indicate that no liability has yet been created for
this account.
Log in to Auditor’s account.
• Enter the User ID: Auditor Password: 12345

• Purchases > Reports > Receiving List

• Ensure that the status is ‘Open’

The auditor will identify that there are two open Receiving document, meaning, no A/P Voucher has
been recorded in these accounts yet, thus, understating the vendor balances.

Double check the findingss by comparing the list of Receiving and AP Voucher.
• Go to Purchasing > Receiving

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• Change the status from ‘Open’
to ‘All’
• Click ‘Search’
• All Receiving documents will appear.
• Do the same procedure for A/P Voucher to view all the existing documents, then
compare the list of A/P Voucher with the list of Receiving documents.

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Now, the auditor can compare the list of A/P Vouchers available against the Receiving documents.
Note your findings below and your proposed adjusting entries:
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________

Exercises
For exercises regarding Testing the Completeness Assertion, refer to Exercise 5.4 of the Exercise
Workbook.

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ACTIVITY 13: Testing the
Existence Assertion
Testing the Existence Assertion

Existence assertion pertains to management assertions that the assets, liabilities and equity
balances exist. For the expenditure cycle audit, existence assertion declares that the vendor balances
recorded in the system really exist.

Examine Subsequent Payments to Suppliers

This test involves scanning the payments made in the subsequent period and check if the payables
recorded in the last period were paid.

Verify if there are payments for December 2021 that are posted on January 2022.

Log in to Manager’s account.

• Enter the User ID: Manager Password: 1234

• Go to Tools > SQL Query.

• On the SQL Query field, type ‘Show tables’ to show all the tables available and get the table
name.
• Click ‘Execute’.
• All the tables on the database will appear.
• Look for the table you want to generate, for example, Payments, the table name is ‘payments’.
• On the SQL Query field, manually type the query:
SELECT * FROM PAYMENTS
• Click ‘Execute’.
• All details regarding Payments will appear.

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Generate an Ad hoc Payment Report

Hint: Get the column name from the Payments previously generated to specify on the next query.

Generate a report where only the Document Number, Document Date, BP Code, BP Name, and Total
Amount are shown. Specify the payment date which is January 2022.

To generate an ad hoc report,

• On the SQL Query field, manually type the query:
SELECT DOCNO, DOCDATE, BPCODE, BPNAME, DUEAMOUNT FROM PAYMENTS
WHERE DOCDATE >= '2022-01-01' AND DOCDATE <= '2022-01-31'
• Click ‘Execute’.
• All the details on the specified columns will appear.

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Exercises

For exercises regarding Testing the Existence Assertion, refer to Exercise 5.5 of the Exercise Workbook.

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ACTIVITY 14: Testing the
Valuation and Allocation Assertion

Testing the Valuation and Allocation Assertion

Valuation and Allocation assertion pertains to management assertions that the assets, liabilities and
equity balances are included in the financial statements at appropriate amounts and any resulting
valuation or allocation adjustments are appropriately recorded. For the expenditure c y c l e audit,
valuation and allocation assertion states that the customer balances recorded are in their proper
values.

Send Confirmation to Vendors to Confirm Balances

One of the most widely performed tests of existence is the confirmation of accounts payable. This test
involves direct written contact between the auditors and the client’s vendors to confirm account
balances and transactions.

View the Aging of Accounts Payable as a basis for sending the confirmation to the vendors
Log in to Auditor’s account.
• Enter the User ID: Auditor Password: 12345

• Go to Purchases > Reports > Aging

• Change the default branch to ‘Head Office’
• Change the default date to 12/31/2021
• Click the small triangle on the ‘Preview’ button. Choose ‘Export to PDF’ from the list.
• Report Layout List window will appear, choose ‘Details’ then click ‘Select’.
• Aging Report will pop-up.

Smartbooks will generate Vendor Liabilities Aging showing the age of payables to the vendors. This aging
could be the basis of the auditor in sending his confirmation of the balances to the company’s vendors.

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Substantive Test of Other
Financial Statement Accounts
Audit of Cash
Perform manual bank reconciliation to know the correct balance of Cash in bank - Metrobank that should
be reported by the Company. Reconcile the Balance per Smartbooks records and Balance per Bank
Statement.

The accountant showed the auditor the Bank Statement sent by the bank for the month of December
2021 as shown below:

Additional Information: The deposit in the bank statement amounting to Php190,000.00 was
traced to a deposit slip sent by Solid Electrics on January 2022. Upon inquiry by the client, the
deposit pertains to a partial payment made by Solid Electrics regarding its amount due to the
client.

Open the General Ledger of the Cash Account in Smartbooks to reconcile it with the Bank
Statement

Log in to Auditor’s account.

• Enter the User ID: Auditor Password: 12345

• Go to Financials > Reports > General Ledger

• Select the G/L Account Code by clicking the selection list button.
• Choose Metrobank Account No. 9021 then click ‘OK’.
• Change the date from 12/01/2021 to 12/31/2021.
• Click the small triangle on the ‘Preview’ button. Choose ‘Export to PDF’ from the list.
• Report Layout List window will appear, choose ‘Details’ then click ‘Select’.
• General Ledger report for Metrobank Account No. 9021 will appear.

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View the Details of Deposits
Log in to Auditor’s account.
• Enter the User ID: Auditor Password: 12345

• Go to Treasury > Bank Deposit > Bank Deposit List

• Change the Deposit Date from 12/01/2021 to 12/31/2021.
• Click Search.
• To open the details of each deposit, double click the item.
• To view the deposited checks, click ‘Checks’ tabs.

View the Details of Checks Disbursed

Log in to Auditor’s account.
• Enter the User ID: Auditor Password: 12345

• Go to Treasury > Checks > Check Register – Cash Outflow

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• Change the Check Date from
12/01/2021 to 12/31/2021.
• Click Search.

Balance per Bank Ref. No. P197,176.80

Add: Deposits in Transit

Less: Outstanding Checks

Total adjustments
Adjusted Balance

Balance per Book P1,340,524.80

Add:

Less:
Total Adjustments

Adjusted Balance

The auditor can now perform his bank reconciliation by comparing the records per bank and

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the records per Smartbooks.

Exercises
For exercises regarding Audit of Cash, refer to Exercise 5.6 of the Exercise Workbook.

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Audit of Inventories
Ensure that inventories are stated at lower of cost or net realizable value.

The company’s manager told the auditor that on December 20, the compartment where the laptops
are being stored caved- in resulting to some exterior damages on the units. The laptops are still
working properly, however, the physical appearance have been damaged and they fear that they
might not sell it on their intended prices, so they decided to hire someone to compute the net
realizable values of the laptops. This list of net realizable values was given to the auditor:

Items Net Realizable Value

Acer Laptops ₱28,000
Dell Laptops ₱25,000
Lenovo Laptops ₱28,000
Samsung Laptops ₱30,000

Compare the recorded costs of the inventories with their NRV and compute for the necessary
adjustment to recognize inventory loss. (Use Auditor’s Account)

Log in to Auditor’s account.

• Enter the User ID: Auditor Password: 12345

• Go to Inventory > Reports > Item Ledger

• Change the branch to ‘Head Office’
• Select the item code you want to audit. For example, A1000.
• 01/Change the date from 01/01/2021 to 12/31/2021
• Click ‘Search’.

Now, the auditor can know the actual cost recorded per system and compare it with its net realizable
value. Take note that the valuation method used for the laptops is First In, First Out (FIFO).

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Exercises

For exercises Audit of Inventory, refer to Exercise 5.7 of the Exercise Workbook.

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Audit of Prepayments
Check if prepayments were representing its actual prepaid amount. If not, make necessary
adjustments to correct the balances.

Upon checking the Trial Balance of the company, the auditor noted two items that can be considered
as prepayments. However, the auditor wants to verify the company policy regarding the method of
recording prepayments since the items are recorded as expense.

View the Trial Balance as a basis of selecting accounts to audit. (Use Auditor’s Account)

Log in to Auditor’s account.

• Enter the User ID: Auditor Password: 12345

• Open Trial Balance in Smartbooks

• Go to Financials > Reports > Trial Balance
• Change the date to 12/31/2021
• Click Preview
• Report Layout List window will pop-up, click Select.
• Trial Balance window will appear.

Upon seeing the contents of the Trial Balance, the auditor decided to audit the Office Supplies Expense
and Insurance Expense account. He wants to see the Smartbooks documents used to record these
accounts as well as any third-party documents.

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The company personnel
provided the following documents:
Sales Invoice

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Service Invoice

Open the Smartbooks document used to record Office Supplies Expense

Log in to Auditor’s account.
• Enter the User ID: Auditor Password: 12345

• Go to Financials > Reports > General Ledger

• Select the G/L Account Code by clicking the selection list button.
• Choose Office Supplies Expense, then click ‘OK’.
• Change the date from 01/01/2021 to 12/31/2021.
• Click the small triangle on the ‘Preview’ button. Choose ‘Export to PDF’ from the list.

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• Report Layout List window will
appear, choose ‘Details’ then click ‘Select’.
• General Ledger report for Office Supplies Expense will appear.

Do the same process for the Insurance Expense.

According to company’s personnel, the estimated remaining Office Supplies is 20% of the original
purchased amount. As for the insurance, upon examination of the Insurance Invoice, it is for 2 years
starting March 1, 2021. The personnel also verified that the company is using expense method.

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Exercises

For exercises Audit of Prepayments, refer to Exercise 5.8 of the Exercise Workbook.

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Audit of Fixed Assets
Determine the correct amount of depreciation that should be recorded for the year.

Upon checking the Trial Balance, the auditor noted that depreciation expenses were yet to be entered
in the accounting records, so the auditor examine the Smartbooks documents used to record the
acquisition of the asset as well as any third-party document to properly know the start date of
depreciation then compute the depreciation expense based on the company’s policy on depreciating
fixed assets.

Depreciation Method: Straight Line

Salvage Value: 10%

Useful Life (in

Fixed Asset
years)
Office Equipment 5
Office Furniture 10
Delivery Truck 10
Leasehold Improvements 20

The following are the documents and information relevant to the acquisition of fixed assets:

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For leasehold improvement, the company personnel verified that a contract dated January 31, 2021
stated that the downpayment amounting P1,500,000 can now be transferred to Leasehold
Improvement account.

View Smartbooks document used to record Office Equipment

Log in to Auditor’s account.
• Enter the User ID: Auditor Password: 12345

• Go to Financials > Reports > General Ledger

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• Select the G/L Account Code by
clicking the selection list button.
• Choose Office Equipment, then click ‘OK’.
• Change the date from 01/01/2021 to 12/31/2021.
• Click the small triangle on the ‘Preview’ button. Choose ‘Export to PDF’ from the list.
• Report Layout List window will appear, choose ‘Details’ then click ‘Select’.
• General Ledger report for Office Equipment will appear.

Do the same process for the rest of the fixed assets.

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Compute the depreciation expense for the fixed assets. Use the table below for your computation.

Fixed Acquisition Acquisition Salvage Depreciable Useful Yearly Period for 2021
Asset Date Cost Value Cost Life Depreciation 2021 Depreciation

TOTAL DEPRECIATION FOR 2021

Exercises
For exercises Audit of Inventory, refer to Exercise 5.9 of the Exercise Workbook.

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Chapter 6: IT Audit Report

At the end of this chapter, students will be able to:

• State the audit findings and recommendations
• Form a conclusion and opinion based on the procedures performed

1. Based on the procedures (exercises) performed, form a conclusion and opinion on the adequacy of
controls and any identified potential risks.

Are the controls established by the company well designed and properly implemented? If yes, then
were those controls able to mitigate the risks associated to them to an acceptable level?

2. State the findings and the recommendations for each finding.

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Chapter 7: Introduction to Business Analytics

Everyone makes decisions. A graduating Senior High School might want to decide on what
college to enroll to. He might choose to forego college for now and find a part-time job. He might even
decide to have a “gap” period to collect his thoughts and plan out his future more. Not every decision is
as potentially life-altering as the above example. A mother will be making groceries and is torn between
two milk brands. Which should she choose? An office worker has the choice to use Grab to hail a ride to
work or he can commute to work using public transportation. He might even opt for a taxi, whichever
might come first. Whichever he chooses would be the result of a quick opportunity cost analysis in his
head: he might go for Grab if he has an urgent meeting, for example.

Everyone makes decisions. This is doubly so for businesses. Businesses fail and prosper with the
decision making of its leaders. The question then becomes: How would the leaders make the best,
most sound decision? There was a time when managers and executives just went with decision-making
using their “gut feeling” based off their past experiences. Wouldn’t it be better when decisions are made
based off quantifiable parameters, supported by facts? This way, the ability to create decisions is always
backed by the company’s numbers: past, present, and projected future. This venture, while sound, is
easier said than done. A company in today’s internet-connected world generates tons of data daily. How
do you make sense of it all? What is relevant, and what is unnecessary noise? How do you cut the wheat
from the chaff? This is where Business Analytics comes in.

What is Business Analytics

Business Analytics, or just analytics, is the use of data, information technology, statistical
analysis, quantitative methods, and mathematical or computer-based models to help managers gain
improved insight about their business operations and make better, fact-based decisions1. The term is
often used interchangeably with Business Intelligence. In some cases, Business Intelligence is used to
refer to the overall practice of data analysis in a business context, while Analytics refers to the deeper,
more advanced methods of analyzing data. Either way, it is a process that involves data, the tools to
gather and interpret it. In practice, the tool to properly disseminate the information to the key
stakeholders is also included.

Business Analytics is primarily a decision-making tool. Some common decisions include:

1. Pricing Decisions
2. Decisions to target consumer segments (age, gender, etc.)
3. Merchandising Decisions (what brands, quantity to buy, etc)
4. Location Decisions (where to establish a new branch, for example)
And many others that affects a business’ operations, supply chain, distribution, finance, human
resources, and more2.

Business Analytics is used to gather data and churn it into actionable items to create strategic and
tactical decisions. Here are some uses of Business Analytics:

1
James Evans, Introduction to Business Analytics, (Pearson Education, 2013), 3.

2
Evans, Intro to BA, 4

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1. Measure the “Customer
Service Level” of a distribution firm. It measures the company’s ability to service their
customers from the moment the sales order has been placed, up to the moment the goods
arrive at their doorstep.
2. Measure the “Overall Equipment Efficiency”. It measures the effectiveness of a production
line of machines.
3. Quantify the abilities of athletes to make a championship-ready team.

The above is a list of just some examples where data is taken and transformed into a measurable and
quantifiable markers with which to base strategies off. These measurable and quantifiable items are
called Metrics.

Metrics and KPIs

As described in the previous section, Metrics are measures of quantitative assessment
commonly used for assessing, comparing, and tracking performance or production3. Simply put, it takes
whatever Measure in the organization’s data and applies calculations and comparisons to them.
Measures, in turn, are the raw numerical data. Any data item that can be subject to the four basic
arithmetic operations is considered a measure. This is an important distinction, as data can come in
many forms, and even if a piece of data is purely numerical, it does not automatically mean that it is a
measure. For example, Employee Codes can be purely numerical to denote hiring order. Even if it is
purely numerical, it makes no sense to add up Employee Numbers.

Metrics come in a wide range and can vary between companies and industries. There are some
that are industry standards, but more often than not, they are customized to an individual company’s
specific needs and outcomes. Executives, and managers, in particular, use them to create strategic and
tactical decisions in order to achieve their goals. Because a metric can come from nearly any data point
in an enterprise, its ability to state a quantifiable target, and the company’s position in relation to that
target at any given point in time is one of the most important characteristics a metric should have.

Generally, executives and managers seek to have a dashboard, where different Key
Performance Indicators are gathered in the same place. These are specific metrics that help measure a
company’s success. This helps simplify analysis and opens up discussions in strategy meetings by having
a single interactive page displaying all the relevant metrics.

Examples of Commonly Used Metrics

1. Sales vs. Targets – one of the most universal basic metrics. It simply shows the difference
between actual sales numbers against the target figure. If the Sales Figure is below the Target
Figure, then something needs to be done.

2. Current Period Sales vs. Previous Period Sales – used as a measure of sales over various
periods of time. Due to economic forces like inflation, Sales Figures are usually expected to
grow over time to counter act it, however, it still depends on the targets set during the

3
Julie Young, ‘Metrics’, Investopedia.com, https://www.investopedia.com/terms/m/metrics.asp, (accessed 6th
May, 2019).

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planning meeting usually done
near the start of the company’s year. Examples include Year-to-Date Sales vs. Year-to-Date
Last Year Sales and Year-on-Year Sales Analysis.

3. Sales vs. Returns – when a product that has been sold is returned at an unsellable state (rat
bites, packaging is too deformed, water damaged, etc.) it will automatically count as a loss to
the company. This metric will allow the company to monitor how much of the products sold
actually get delivered without issue to its customers. Too many returns on a particular product
make and model might point to a problem from the supplier/warehouse/delivery process or
too many returns from a particular customer might indicate a problem with that customer.
This is separate from the Returns vs Target Returns metric.

4. Sales vs. Invoice – for large companies, the sales process is more than just the face-to-face
exchange of money and goods between two parties. In this way, we can think of the Sales
numbers as the “expected sales” value, while the Invoice numbers are the “actual sales” value
that will count towards the company’s profits. There is usually a time difference between the
time an order is placed and the actual billing of said order. Because billing will only be counted
for actual goods/services delivered, there will be instances where only partial billing will be
done while the remaining goods/services will be delivered on a later date. This metric will
help keep track of those partial billings so that 100% fulfillment can be achieved.

5. Truck Utilization – distribution companies deliver products from their warehouse to their
clients. Using a truck for deliveries represent an expense in terms of labor, vehicle
maintenance, and fuel. Each truck has its own rated dimensions and maximum weight rating.
This metric will help maximize how each truck is used: making sure that it is close to full
capacity (in terms of dimensions and weight) and have routes that will serve the most
customers coming to and from the distribution center.

6. Customer Segmentation – knowing the customer is one of the quickest ways to expand a
business’ earning potential. This metric will enable the business to know which of their
customers make up the bulk of sales. Customers can be segmented by Gender, Age, Location,
Industry, etc. Knowing the customer segmentation and the performance of each segment will
help create a more focused marketing campaign.

7. Hiring Rates – Hiring Managers and Staff are usually evaluated at the rate they are able to
process applicants from initial interview to final contract signing. This metric will help them
monitor applicants and how they get past each stage of hiring to figure out if new hiring
practices should be relaxed or be more stringent.

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8. Occupancy Rate – measures the rate at which rooms are reserved in Hotels. This helps the
management figure out just how much of their rooms are used by customers. At the same
time, if expressed as a function of time, it will help determine lean and peak seasons for the
business, which helps set expectations and help ease preparations when a sudden influx of
occupants appear.

9. Service Level Agreement – SLA’s are used in IT Support Organizations to keep track of support
tickets and team utilization. It gives an idea of how effective the organization is by getting the
number and kind of tickets (from low priority to show stopper) and the average response
time. Each kind of ticket has its own window wherein it will need to be solved. An effective
organization is one where each kind of ticket is resolved within this window. Any misses will
open up discussion on what exactly happened and what will need to be done to avoid such
misses in the future.

10. Lead Summary – a marketing campaign will have different ways to generate leads when trying
to drum up interest on a product and/or brand awareness. Methods include internet ads,
television ads, print ads, on-premise events, etc. Knowing which method yields the most
responses will help focus company resources in the method with most impact.

These metrics will typically be expressed from the Top Level, that is, the total number for the
whole company. They can then be drilled down to multiple levels. For example, the Sales vs. Target
Metric can be drilled down to a Per Brand level to evaluate the performance of account managers, then
drilled down again to Per Item to see which items or SKU (Stock Keeping Unit, pronounced “skew”) are
actually turning a profit.

Enterprise Dataflow
While we have so far discussed the importance of the analytical/analysis aspect of Business
Analytics, we must not forget that it is only a part of the whole process. As the saying goes, “The
numbers don’t lie”. But what if they can? One thing that should be kept in mind, especially when
working with computers is this: Garbage In, Garbage Out. When you input a garbled mess, expect
output that will be less than useful. In our end goal of data analysis, this basically means putting the
veracity of our data to the test. How sure are we that the data we are analysing is correct? It may seem
to be an obvious concept, but in the real world, making sense of what data is needed in our analysis and
whether that data is correct is not 100% guaranteed, and thus we should take a bird’s eye view of how
data travels inside an enterprise. This can be easily done through the use of a basic System Landscape
Diagram:

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While ultimately the focus of this courseware is going to be on the analysis aspect, it still would
be a good idea to learn about the data’s journey through the enterprise. As you can see, a lot has to
happen even before we can attempt analysis. Let us now walk through each part of the landscape,
starting from the left:

Data Sources
An enterprise’s data needs grow bigger and bigger as the business scales up. Due to this, the
machines (servers and clients) bought to address data needs a few years ago might no longer be enough
to address the need today, yet they are system-critical that taking them offline even for a bit could
create an operational scenario where the business users won’t be able to transact, which makes the
data for reporting to the higher ups no longer accurate or no longer available. There are three main
categories of data sources in an Enterprise.

ERP Systems
In an ideal world, ALL of an enterprise’s data is fed into its ERP System and all reports are
obtained directly from it. However, the real world makes it difficult because in the end, ERP Systems are
still just machines, with their limited (not infinite) capacity and processing power. An ERP System might
also not be able to address an enterprise’s needs as the company grows larger. This means that the
company will then have to procure a new ERP System, or upgrade its current one, which requires a
significant investment.

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An ERP System makes extensive use of Master Data to help keep track of Business Partners and
Items. Usually the maintenance of these is assigned to key people, who will be the ones to manage the
creation of new Master Data or the updating of such. Lastly, when new equipment is bought or an
existing ERP System is upgraded, the company might need to schedule a little bit of down time to
implement them. The ERP System is unavailable at these times, so these will need to be scheduled
ahead of time, and concerned parties will need to be informed so they can work around it (adding
System Memory, for example, requires for the system to be shut down first before new Memory
Modules can be installed).

Other Databases
Sometimes, due to geographical or cost constraints, a branch of the company might be
physically impossible to connect to the corporate network. This means that they can’t use the ERP
System without resorting to workarounds. One such workaround is to maintain a separate database that
records all transactions for the day. At the end of the day, the database will upload the collected data to
the ERP system.

In other instances, databases might be part of a legacy system that is still being used. It might be
integrated into a Business Process that is system-critical, and current Cost/Time/Technical constraints
mean that they can’t be assimilated to the ERP system just yet. In order to be able to decommission
these systems, the business process and the data they produce must be integrated to the ERP. If this is
impossible, then an Enterprise Data Warehouse will be required to consolidate their data. This will
require additional cost in time and manpower, as it is a project that will require specialized knowledge in
both the legacy system AND the ERP/EDW (This is an example of Data Migration).

Flat Files
As mentioned before, in a perfect world, all of an enterprise’s data is going to be present in the
ERP, for instant extraction and reporting. However, in reality, there is a process in place so that data
within it cannot be tampered with. Transactions will usually have an approval process to help keep out
doubtful and fraudulent records, while Master Data is managed by key employees. However, there are
some instances where a branch is in such a remote location that an internet connection is not available.
This is where Flat Files come in. Transactions for that branch will be recorded in a flat file, later to be
sent to the Head Office for processing and consolidation.

Flat files are usually Excel or delimited text files that business users create in order to make their
own reports when needed. Delimited text files are usually either tab-delimited or comma-separated
value (CSV) files. These files can still be opened in Excel, though tab-delimited files might need a few
extra steps before it can be read (though because they are text files, Notepad will also do). In order to
keep an accurate enterprise-wide report, these will have to be formatted in such a way that it can be
uploaded back into the ERP or Enterprise Data Warehouse.

Enterprise Data Warehouse

While the ERP system has some built-in reporting functionality, it is far from a complete
solution. The most obvious limitations are the fact that custom reports are difficult to create, and data
visualization capabilities are lacking, if present at all. What’s more, the reporting functionality will also
consume system memory in order to be processed. This can have an adverse impact on its ability to
transact, especially if large, detailed reports (per customer or per item, or worse, both) are needed. An
Enterprise Data Warehouse is needed in order to work around these limitations.

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The Enterprise Data Warehouse is built in order to consolidate the disparate data sources so
that only the data necessary for reporting will actually be used. Consolidating data is an important
aspect of Business Analytics, because first and foremost, above even facilitating data analysis, is
concerned with delivering “a single version of the truth”. That is, an accurate representation of the
business, from any view point. From an implementation standpoint, this will require the following:

1. New hardware that will become the server hosting the Data Warehouse. It must be connected
to the corporate network.
2. A dedicated project team from the Enterprise Side made up of Business Users.
3. A dedicated project team either from the Enterprise IT Team or an external organization who
will be responsible for setting up the environment.

Building an Enterprise Data Warehouse is a massive undertaking that can take weeks, months,
even years to complete, depending on how large the target scope is. In order to build an Enterprise
Data Warehouse:

1. The Business Users will need to determine the reports they want to derive from their data
sources.
2. The Business Users will then convene with the IT Team in order to iron out the technical
requirements (Blueprinting). This includes providing information on business processes and
where the data can be obtained. This could take a few days to a few weeks.
3. Once the IT Team has worked out the actual requirements needed by the Business Users, it is
time to implement the EDW to those specifications.
4. Testing will follow for data accuracy with the help of the Business Users.

Because it is on separate hardware, it usually follows a daily “load schedule” during off-peak
hours, usually midnight or very early morning, where the previous day’s transactions will be loaded into
it. It is scheduled during off-peak hours because those times are usually the ones where the ERP
especially, is not being used.

Note that the EDW is at its core a large database. If the scope starts becoming too large, it may
be advisable to create another one that will have its own purpose, but uses the same Data Sources.
Hardware may be powerful enough to host multiple Data Warehouses in the same machine.
SMARTBOOKS Warehouse is a tool to help build Data Warehouses, as is SMARTBOOKS Data Services.
Note that the actual implementation is highly technical, so the Business Users are not expected to
actually help build the EDW, rather the IT Team might defer to them occasionally to ensure correctness
and accuracy, and clarify some other things that did not come up during Blueprinting.

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Reporting Tools
Once the Enterprise Data Warehouse has consolidated and sorted out the individual data
elements required by the Business Users, it is time to recombine them into a report that will then allow
analysis by the Business Users to help keep track of the status of the business. Because the Enterprise
Data Warehouse is essentially a large Database, it is likely that technical column names are still used
instead of more common, Business-friendly terms. For example, a database column that represents a
Business Partner’s last name is called “INDIV_FNM” or some such. This doesn’t really make sense from
the Business User’s perspective, as the name doesn’t immediately make sense. To help alleviate this, a
Semantic Layer is set up as a sort of “translator” so that the Business User can immediately understand
what the data is, by allowing them to see technical terms as business terms.

One other bottleneck in reports creation and Data Analysis is the complexity of extracting data
from the EDW for analysis. It used to be that the Business User will have to request data from the IT
Team. This provides a lot of delays in information. For one, the actual extraction might take some time,
and the fact that the IT person may not be all that well-versed in Business Lingo, which will affect the
quality of data. If it’s wrong, he will have to re-extract the data. All of those delays, and that’s not even
counting the delays from having to wait for response E-mails!

One of the defining features today in Business Analytics Tools is what’s called Self-Service BI. In
addition to the Semantic Layer, reporting tools are created with an easy to understand interface (usually
drag-and-drop actions make up the majority of interactions) so that the Business User will be
empowered to create their own reports. It covers easy extraction from the Data Warehouse to Report
Creation to Publishing, without or with minimal help from IT. This helps with the timely flow of
information, as reports can be created in an instant by the Business User alone.

Another aspect of Business Intelligence is the quick dissemination of reports to their intended
audiences. It is for this reason that specialized tools also usually come with the ability to log in to a
platform where reports can be published.

Data Visualization
A typical company will process a lot of data, and because of that, the ability to sift through a lot
of data in order to be able to do timely analysis and from that analysis bring forth insights to steer the
company into making the best decision at any impasse. As we have seen in the previous topic, the
enterprise’s data can essentially be displayed like so:

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The above table contains 72 individual data points that shows GPU Sales by the brands that we
are carrying in our shops. In preparation for a business strategy meeting, you were tasked with finding
out the following information:

1. The brand with the highest sales and when

2. The brand with the lowest sales and when
3. The bottom 3 brands in terms of sales in February

How long did it take you to come up with the answers? Were you immediately able to discern
the information at 100% accuracy? Now contrast the difficulty and timeliness when analyzing something
like the following:

Take note, as well: the GPU Sales table only contains 72 data points. A real company, even the
smallest one, will generate a whole lot more. Now with that said, we should take care on how we
visualize data, as there are a lot of different charts and graphs we can use, but not everything is
universal. Some charts lend themselves to better convey a specific type of information or message than
others.

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Representing Data with Charts

Using charts allows users to transform tabular data into a graphical representation. It makes
analyses easier to digest and helps retain audience’s attention. There are many different types of charts,
and not all of them are created equal. Some are more suited to display certain types of information
compared to others. For example, a chart best for monitoring trends over time might not be the best
choice to show contributions to a whole. The following are just some of the different charts that can be
used to display data:

Bar/Column Charts

Bar charts represent data using horizontal rectangles. They are invaluable for quickly conveying
a comparison between values of a series of data. In the above example, we can infer at least two
important pieces of information: which genre of movie generates the most Income relative to other
genres (going by the size of the bar), and on which state relative to other states (going by the color of
the bar). Column charts convey the same information, only the orientation is different:

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Stacked Bar/Column charts display the contribution of each data point to the total value:

In the above example, the Income is expressed as a 100% value for each genre, and shows the
contribution of each genre to the total.

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Line Charts

Line Charts provide a useful means for displaying data over time4. You may put more than one
line in the chart to monitor multiple data sets in the same time frame. Be sure to do so sparingly
because it can make the chart look cluttered, and defeat the purpose of simplifying data analysis.

4
Evans, Intro to BA, 56

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Combination Column-Line Charts

The Combination Column-Line Chart combines the properties of both line charts and column
charts. They allow for analyzing trends and comparisons at the same time. The most common usage is
to monitor sales performance over time. In the example above, the target is expressed as a line chart
while the Income is expressed as a column chart. If the column exceeds the line chart, then the
performance was great because the target was surpassed.

Pie Charts
For any given set of data, we are usually interested in finding out the relative proportion of each
data source to the total5. For this Pie Charts are used. This is done by expressing the total as a circle,
then partitioning it into different slices. The bigger the slice, the greater the contribution to the whole.

5
Evans, Intro to BA, 56

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Be very particular with the data being analyzed when using a pie chart. If there are too many
slices, it will look cluttered, and you will also have to factor data labels if necessary.

Scatter Charts
Scatter Charts show the relationship between two variables. To construct a scatter chart, we
need observations that consist of pairs of variables (numeric data points)6. For example, a college
student will have different grades per semester per subject, midterms and finals, in particular. The chart
will show if the grade for the midterms is an indication of the grade in the finals.

Bubble Charts
Bubble Charts are a type of scatter chart, in which the size of the data marker corresponds to
the value of a third variable. It is a way to plot three variables in two dimensions. 7

6
Evans, Intro to BA, 58

7
Evans, Intro to BA, 59

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There are many other kinds of charts used for analyses. Some charts even use geographical data
so that any of the other kinds are laid out on a map to see a quick summary for the different regions
used by the business. Some of these charts will be seen in the later topic, which is the hands-on activity
on how to use Microsoft Power BI.

Effective Visualization
Now that we have the building blocks on how we can visualize data, how can we make good use
of them? Let’s go back to the saying: “The numbers don’t lie”. Even if after all of the data
transformations in the System Landscape has been tested for accuracy and we are 100% sure that the
data is correct, the presentation of data can have a huge impact on how insights can be derived from it.
That is to say, the way we present our findings have an effect on how the “objective truth” that the raw
numbers dictate. In this topic, we will see some examples on what to avoid so that we can build
effective visuals. Take for example the following column charts:

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Objectively speaking, they tell the same thing. The Blue Column is not as high as the Orange
column. The chart on the right says that the gap is not really that big. However, if we go with the chart
on the left, it seems that the gap is astronomical at first glance. That is, until you take a look at the axis
labels and see that the right chart starts at zero, and the one on the left starts at 50. As you can see, the
way we present our data can have an impact on the conclusion that we can obtain or present. The chart
on the left did not technically lie, but it manipulates the “severity” of the message in order to mislead its
audience.

The above is not the only reason to be careful with our data presentation. Keep in mind that
nowadays, enterprise data is used to create “stories” that will be used on Business strategy meetings
and even marketing materials. It is in our best interest to make sure that the way data is presented
promotes easy readability while making sure that the messaging is accurate and does not mislead. When
it comes to readability, take note of the following:

1. Keep it simple. Use a uniform color scheme to minimize items having the same shade and
avoid using 3-d versions of charts when 2-d ones will suffice. 3-d charts usually skew the
perspective and may present inaccuracies. Take the example below.

Item Sales

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The blue slice seems to be smaller than the green slice due to the 3-d effect, but if we turn
on data labels or convert the chart into its 2-d equivalent, we’ll see that it not the case:

Item Sales

Item Sales

Simple is almost always better than fancy.

2. Speaking of data labels, they can also affect readability. Make sure to use readable fonts
(usually ones without serifs). Also, the location of the labels are important. Take the following
example:

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The labels are supposed to be inside the slices, but because there are slices that are close in
value, there are places in the chart where it is hard to discern which label corresponds to
which slice. Finally, the formatting of the label Number, Percent with the number
portion using comma separators is confusing. This type of information might have been
better preserved as a table instead of forcing it into a pie chart.

In enterprise reporting, individual charts are rarely used to convey information. Usually, multiple
analyses and KPIs are monitored in one page known as the Dashboard. Dashboards are single-page
interactive documents used to track different aspects of the business. Note that when you create a
dashboard, keep in mind the direction people read. People read from left to right, top to bottom. As
such, on top of the above considerations, we must also mind the way we lay these visualizations out to
ensure maximum readability. You can’t just lay individual charts haphazardly:

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This means that effective design involves placing the most important KPI’s near the top left of the page,
such as below. Another thing to keep in mind is to keep the interactive elements near the top of the
page in a single location. Make sure to group together KPI’s that deal with the same business aspect
together as well.

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Microsoft Power BI
What is Microsoft Power BI?
Microsoft Power BI is a Self-Service BI Solution developed by Microsoft. It was first released in 2011 and
is now one of the premier BI Solutions in the world, implemented across over 35,000 companies all over
the world spanning multiple different industries. It offers a lot of flexibility of access to report creation,
data analysis, and report publication.

It is a collection of software services, apps, and connectors that work together to turn your
unrelated sources of data into coherent, visually immersive, and interactive insights. Whether your data
is a simple Microsoft Excel workbook, or a collection of cloud-based and on-premises hybrid data
warehouses, Power BI lets you easily connect to your data sources, visualize (or discover) what's
important, and share that with anyone or everyone.

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Ways to access Microsoft Power BI

There are multiple ways to use Power BI:

1. Power BI Desktop – the application is installed in the local machine, either by using a dedicated
installer or downloading from the Microsoft Store. It offers some advanced utilities such as data
clean up, data modelling, and other advanced analysis options (such as the usage of DAX functions
to enable more advanced Statistical Analysis) and the like. All of these on top of the ability to
create and publish reports.

2. Power BI Service – the application is accessed via the Power BI Portal. The user will need to log
on using his/her account and from there access the report creator. It is cloud-based, so for as long
as the user has an internet connection, he can access his work through a web browser (even
mobile devices). This is also where the main collaborative functions, such as Workspaces are
found.

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3. Power BI Mobile App – a free-to-download app (available in both iOS and Android platforms)
where the user can log in using the same account he uses for Power BI Service. This mobile app
is one of the main ways users can consume (not create) published reports. This will allow
managers and other employees of an enterprise to be able to check up on different reports even
if their computer is unreachable.

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For this courseware, we will be using Power BI Service and the Mobile App.

Getting Started
In order to start using Power BI Service and its collaboration options, you will need a Power BI
Account with a Pro License (this should have already been provided via e-mail). For a Power BI Business
user, there are 5 building blocks they will need to get familiar with. These are:

1. Visualizations – a type of chart built in Power BI.

2. Data Sets – a container of data. These can come from a variety of sources, including files and
databases.
3. Reports – one or more pages of interactive visuals, text, and graphics. A single page is often
dedicated to answering a central area of interest.
4. Dashboards – a single page that uses visualizations to tell a story. It contains much of the
same elements as a Report. However, t is different from a Report in that the single page can
contain visuals from different separate reports. This allows different key areas from different
reports to be much more easily seen in a single page.
5. Apps – a way to bundle and share related dashboards and reports together.

Collectively, these building blocks are referred to as Content. Report creation in Power BI
Service usually has the following workflow:

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A typical workflow will usually involve all the building blocks. A designer
(yellow boxes) collects data from a dataset and creates a report. After
which, the designer will publish the findings via creation of dashboards
and apps so that the business user (black box) can take action.

It is important to note that designer and business user in this context refer
to roles as seen from Power BI. The designer is responsible for the
creation of content and the business user is responsible for its
consumption and analysis. In most cases, the business user relates
requirements to the designer so that the report can be built to certain
specifications. In some cases, employees in an organization are trained on
how to use Power BI so that said employees can act as BOTH designer and business user.
This allows the enterprise to save up a bit on licensure expenses.

Screenshot and Mobile Device Disclaimer

Please note that because Power BI is under continuous development by Microsoft so that new
features will be implemented, there might be some discrepancies with the screenshots and there might
not be an exact match with what can be seen on-screen. The screenshots are taken using Google
Chrome web browser, so when following along, it would be best to use it on the user’s end as well (be it
on a computer or mobile device). Also, please note that the user experience was designed for usage
with a computer’s web browser in mind. There will be some differences in usability when Power BI
Service is accessed via the browser on a mobile device. If a mobile device will be used for creating
reports, it will have to be used in landscape mode, and please note that for almost all mobile devices,
right-click is mapped to the tap-and-hold gesture, with the right-click menu appearing after the user lets
go of the screen.

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Capstone Activity
We will now be using Microsoft Power BI to create our reports and analyses based on our
sample data.

Setting up your account

# Activity Expected Outcome
1 Check your e-mail for the
message about your Power BI
Account

2 Open your browser and go to the

following link:
https://powerbi.microsoft.com

Click on “Power BI Service” and

log in using your credentials

2.1 For Mobile Users, click on the

button with three horizontal
lines then select “Power BI
Service” and log in using your
credentials.

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2.2 It is also advisable to request the

desktop version of the site. Go to
the browser settings and turn on
Desktop site.

Notes:

This is to try and make the on-screen elements adjust

automatically.

The exact name and location of this option might change

depending on the make and model of the device, the
browser used, and the version of the browser.

3 After supplying your username

and password, you will
encounter this message. Click on
Next.

Notes:

The next steps will involve using both the browser and the
Authenticator App.

4 You will be redirected to the

“Keep your account secure”
page.

On your mobile phone,

download and install Microsoft’s
Authenticator App.

After the app is installed in your

phone, click next on the web
browser.

Notes:

The bottom screenshot is from Google Play Store. The

phone used for the screenshot already has Authenticator
installed, which is why there is no “install” option.

If you are having trouble finding the app, simply search for
“Microsoft Authenticator”, without the quotes.

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5 In the Authenticator App, click

on the three dots on the upper
right hand corner of the screen,
then set up a “Work or School”
Account, then click Next on the
browser.

6 You will be presented with a QR

code on the browser.

On the Authenticator App, select

“Scan a QR Code”. Scan the QR
Code on the screen, then once
the scan is complete, click Next
on the browser.

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6.1 If you can’t scan the QR Code for

any reason, there should be an
option to enter the code
manually at the bottom of the
Authenticator App.

You will then be prompted to

manually type a Code and URL.

The Code and URL can be found

in the Web Browser, by clicking
the Can’t Scan Image? Button.

Click Next on the browser when

you are done inputting the code
and URL.

7 You will then be testing the sign

in. Approve the sign in on the
mobile app in order to get the
following screenshot.

Click on Next

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8 Click on Done

9 If an error is encountered, simply

restart the browser, then try
logging in again.

Creating a Sample Report

Logging In and Creating a Workspace
# Activity Expected Outcome
1 Launch your web browser

Notes:

Majority of log in steps are a repeat of the initial account

setup process in the previous section. Ignore this section if you
are already logged in.

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2 Go to the following link:

https://powerbi.microsoft.com

Click on “Sign In” and log in using

your credentials

2.1 For Mobile Users, click on the

button with three horizontal lines
then select “Power BI Service” and
log in using your credentials.

2.2 It is also advisable to request the

desktop version of the site. Go to
the browser settings and turn on
Desktop site.

Notes:

This is to try and make the on-screen elements adjust

automatically.

The exact name and location of this option might change

depending on the make and model of the device, the browser
used, and the version of the browser.

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3 After logging in, you should be

redirected to the Home Page on a
new browser tab.

Note: what you see on your screen will differ from the
screenshot here. If it is the first time you logged in, you will
not see any Favorites + frequents entries, for example.

4 We will now start the report

creation process by making a
Workspace.

On the left-hand side of the

screen, click on “Workspaces”
then click on “New Workspace”

The workspace feature will require a PRO License. Accounts

given to students will have a PRO License attached. Power BI
has many different licensing schemes that are out of the scope
of the discussion in this courseware.

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5 A new panel will open to the right

of the screen. On this new panel,
give the Workspace a Name and
Description. You can also give it an
optional icon, which may help you
identify the workspace by sight
when you start managing multiple
of them.

Click Save once done.

This will redirect us to the

Workspace itself.

The Workspace is a place for multiple users to collaborate with each other. All content inside a
workspace can be interacted with by all the different users that are granted access to it. The kind of
interaction users have available to them will depend on the kind of membership that has been granted
to them by the Workspace Creator.

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Uploading a Data Set

# Activity Expected Outcome
6 We need to upload the data
that we will analyze into Power
BI.

In the Workspace, click on New

then click on Dataset

7 We can upload either an Excel

or CSV File, or manually paste
the data. In this case, we will be
uploading a Sample File.

Click on Excel

8 A new window will open.

Navigate to where you saved
the sample file, then select
Smartbooks with BA sample
data.xlsx file. Click on Open

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9 A message will appear in the

upper right hand corner of the
screen. Wait for the data upload
to finish.

You will know that the upload is

finished when you get
redirected to a “Summary Page”
of sorts regarding the statistics
of the uploaded data.

Click on the Workspace Link to

go back to the workspace.

10 You should now see the

uploaded data set. A report can
now be created based on this
uploaded data. Hover the
mouse on the Smartbooks with
BA Sample Data dataset, click
on the More Options Button,
then click Create Report

11 The Report Creation Interface

should appear

Before proceeding with the creation of the sample report, let us familiarize ourselves with the
different parts of the interface.

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1. Menu Bar – save the report using the File option, and the ability to change how the report is
being viewed, along with allowing the user to insert some other elements in the report such
as text boxes and editing how the different visualizations interact with each other.
2. Report Canvas – this is where visualizations are laid out and formatted.
3. Filters Pane – sets options on limiting the displayed data in the report.
4. Visualizations Pane – contains two parts: The first one is where the user can select
visualizations to put into the Report Canvas. The bottom part is where the properties of the
selected visualizations can be changed. This bottom part is context-sensitive (options change
depending on the selected Visualization). It can contain up to three tabs: Fields, Format, and
Analytics.
5. Data Pane – contains all the data fields that were in the dataset. Power BI automatically
assigns the field names as they appear in the top row of the data source.
6. Page Options – allows to add, delete, rename, and duplicate pages.
7. Workspace Link – allows the user to quickly go access the currently selected workspace.

The report creation process is as follows:

1. Select the visualization by clicking on the desired type in the Visualizations Pane.
2. Select data to be included in the visualization by ticking the checkbox in the Fields Pane. If
the user needs more control over the order of fields, drag and drop the Field from the Fields
Pane to the Field Tab of the Visualizations Pane.
3. Resize and format the visualization.
4. Repeat steps 1 to 3 until all desired visualizations are complete. Be sure to save often!
5. Publish the Report.

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6.

Let’s now proceed with creating a sample report with two visualizations.

Creating the Sample Report

# Activity Expected Outcome
12 First, we want to see the
contribution of each Sub Income
Stream to for the month of May.

For this, we will need to add a Pie

Chart.

In the Visualizations Pane, select

Pie Chart.

A chart template should appear in

the report canvas.
Notches on the sides of the template indicates that the visual is
selected.

13 In the Data Pane, put a check on

the Income Streams and May
(Actual) Fields.

This should update the chart

template in the canvas with the
proper visuals.

14 Resize the Visualization so that it

takes up roughly 1/2 of the canvas,
positioned at the right.

You will sometimes see dotted red lines while resizing and
moving visualizations around. This helps in getting the proper
alignment of the report’s visual elements.

15 Click on any empty space in the

canvas to make sure that there are
no visuals selected, then add a Line
and Clustered Column Chart. A
Chart Template should appear on
the left side of the canvas.

This Graph will show the compare the Actual Income Stream on
the Month of April and May

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16 Move this chart to the lower left

quadrant of the canvas then check
the Data Income Stream,
April (Actual) and May (Actual).

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17 Click on any empty space in the

canvas to make sure that there are
no visuals selected, then add a (3)
three Cards. Position the 3 cards at
the upper left part of the canvas.

18 While the 1st card is selected,

check the May (Actual) then select
the 2nd card, check April (Actual)
lastly select the 3rd card, check
Difference.

19 The final report should look like

this.

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20 With the sample Report

completed, click on File in the
Menu Bar and then click on Save.
A new window should open up.
Give it a name, then click on Save.
This is the only time in this guide that you will be explicitly
instructed to save your report. As Power BI Service has no auto-
save function at the time of writing, make sure to save often to
minimize the risk of lost progress.

21 Because this is the first time we

saved, the report will be redirected
into the Reading View. In order to
continue working on and editing
the report, on the Menu Bar, click
on Edit.

22 Identify Patterns and Trends on the See Sample Analysis Below

Report and conduct a more in-
depth analysis then finally draw a
conclusion or recommendation on
each visualization.

Exercises
Refer to Exercise on the workbook provided by your instructor.

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***Nothing follows***

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