Using Visualization Software in the Audit of Revenue Transactions to

Identify Anomalies: Souper Bowl, Inc. Case Study

University Of Maryland Global Campus

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RUNNING HEAD: Souper Bowl, Inc. Case Study

1. Read the articles assigned by your instructor to gain an understanding about how Big Data, data

analytics, and new technologies are transforming external audits. After reading these articles, provide a

response to the following two questions:

a. Discuss at least three specific ways in which Big Data, data analytics, and new technologies can

enhance external audits. How does each item discussed improve the effectiveness and/or efficiency

of the audit?

There are many ways how Big Data, data analytics and new technologies are changing the way

audits are being performed. One way is by taking information and turning it into data to do the following:

1) identify and assess the risks associated with continuing an audit. They can use data to determine which

company is at risk for bankruptcy and which are more susceptible to different levels of fraud (Min,

Chychyla, and Stewart, 2015). Another way is by using data analytics to perform tests on large numbers of

journal entries to identify risks and items of audit interest (Raphael, 2017). Another way how technology is

impacting the audit is by using other technological devices like mobile devices like smart phones and

tablets (Raphael, 2017). Smart phones and tablets, permit with the use of integrative applications on the

smart devices to help count and analyze inventory (Raphael, 2017). The auditor can input or download

inventory counts and automatically run real time consolidations and analysis through the application

(Raphael, 2017). This not only runs the analysis in real time but also converts the data into an electronic

copy for records (Raphael, 2017).

b. On the other hand, what challenges do auditors face when using Big Data, data analytics, and new

technologies during an audit?

Despite the many positive outcomes that new technologies and Big Data, data analytics provide, there are

some challenges. These challenges include increase in manpower, time and training (Min, Chychyla, and

Stewart, 2015). The amount of raw data needs to be converted into useable data for analysis to be made.
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RUNNING HEAD: Souper Bowl, Inc. Case Study

There is a significant time commitment to the data conversion and the auditors are not completely trained

in data analytics (Min, Chychyla, and Stewart, 2015). This presents a challenge on how to do the data

analytics. This would mean that the auditors would need to outsource to third parties which present a

privacy concerns (Min, Chychyla, and Stewart, 2015). Another challenge it present is that data analytics

testing can create false positives. False positives can make an auditor take too much time on testing

samples that do not need to be tested and become overloaded due the findings (Min, Chychyla, and

Stewart, 2015).

2. As noted in the case, auditing standards specifically require auditors to identify revenue recognition as a

fraud risk in most audits. Based on your understanding of the company, what factors may increase the risk

of fraudulent financial reporting in Souper Bowl’s 2016 revenues?

Souper Bowl Inc, like all other businesses are vulnerable to fraud. Unless the company has proper

internal controls to mitigate and minimize the risks, they can experience fraudulent activity. Some factors

that present high risks are 1) the freedom to advertise and offer promotions to increase sales. Also another

risk is in the potential incentivizing of the bonus. Bonuses are made to bring competition and allow the

employees to work towards a target, but on the other side it can provide substantial pressure to perform for

underperforming stores which can lead employees to engage in fraudulent activities.

3. Use the daily sales by location as provided by the client (2016 and 2015) and the weather data from

NOAA to perform disaggregated sales analytics in Tableau. Your goal is to develop visualizations that

identify potential outliers in the 2016 daily sales data related to the significant risks identified by the

partner and manager. Using the memo template in Appendix B, document your analyses and conclusions

as to the specific daily sales from certain locations that you recommend selecting for focused substantive

testing.
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Souper Bowl Inc.—December 31, 2016

Disaggregated Revenue Analytics

Purpose: The purpose of this memo is to document plausible trends and expectations for disaggregated

revenue data and to identify specific days and locations that warrant further substantive investigation.

Data: We obtained a listing of daily sales by location from the client’s IT system. We tested the details

for mathematical accuracy, as summarized in the table below:

Table 1
Total Sales per Store Type and Fiscal

Store Type 2015 2016

1 4,032,383 3,962,391
2 9,558,584 9,331,176
3 5,546,768 5,425,422

Grand
19,137,735 18,718,988
Total

Procedures: Based on our risk assessment process, we identified the following assertions as

significant risks related to revenues/sales:

• Recorded sales occurred.

• Sales are accurately recorded.

• Sales are recorded in the proper period.

Because Souper Bowl’s operations are solely in the state of Maine, we obtained disaggregated data that

reports daily sales by store location and Store Type. Based on discussions with management and our

review of the board of director minutes, we are unaware of any new store locations or other major
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RUNNING HEAD: Souper Bowl, Inc. Case Study

changes to operations during the year. Therefore, we expect the prior year’s revenues to be a reasonable

baseline expectation for this year’s revenues (e.g., similar seasonal trends). Because the business can also

be impacted by weather conditions, which vary by year, we also perform analyses that consider changes

in weather patterns to predict expected changes from the prior year’s sales. We performed several

analytics to identify unusual trends as compared to the prior year’s sales, taking weather conditions into

consideration. The purpose of these analytics is to identify specific observations (or specific sets of

observations) to select for further substantive testing. The analytics that we performed are as follows:

Visualization Analysis #1: Overview of Sales per Store type across Maine.

Figure 1. Overview of Sales per Store type across Maine.

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RUNNING HEAD: Souper Bowl, Inc. Case Study

Visualization Analysis #2: Sale Patterns per Fiscal Year per Store Type
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RUNNING HEAD: Souper Bowl, Inc. Case Study

Figure 2. Sales Paterns per fiscal year per Store Type

Figure 3. Looking at sale per quarter

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Visualization Analysis #3: April Sales for Store #1006

Figure 4. April Sales per Day for FY2016

Visualization Analysis #4: Analysis for Quarter 1 sales in February 2016

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Figure 5a. Sales in February 2016 vs Baseline (FY2015), Comparison between store type for Qrt 1 for
February

Figure 5b. Sales for February 7th, 2016 vs Baseline (FY2015), specifically looking at February 7th

Visualization Analysis #5: January 2016 Sales; Store# 1007, #1029

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Figure 6. January 2016 Sales for Store# 1007, #1029 vs. TMIN

Conclusion: Based on the procedures described above, the audit team will pull supporting sales

information to substantively test transactions from the following locations and days:

From Figure 1, note, that majority of the sales occur in the First Quarter for both fiscal years 2015,

2016 and in the fourth quarter. Which corresponds to weather changes and shift. The weather in the fourth

and first quarter is colder so the increase in soup sales is reflective of that. In comparing the Average Sales

per month and average minimum temperature (TMIN), there is a spike in soup sales when the temperature

is significantly colder, with minimum snow which present minimum route conditions challenging. In

essence you can see an inverse relationship between sales and TMIN. From the figure it also shows which

Store Type is performing better than the other two Store Types. The patterns between the three in
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performance show similar drops and rises in sales for certain months but when you compare the total sales

per Store type, store 2 is over performing in sales over the past two fiscal periods. This observation

presents opportunity for further data investigation into Store Type 3. Why is that Store 2 is over

performing in sales when majority of Store Type 3 locations are in the South West are of Maine which is

also populated with Store Type 3 locations? Since both Store Type share the region, data would show that

both Store 3 and 2 have similar sale numbers as opposed to Store Type 1 and 3. Further investigation of

Store Type 2 should occur.

Last Fiscal Year, the three Store Types showed a consistent decrease in sales. In Fiscal year 2016,

sale trends show that the decrease is still present as temperature increased however, the sales were more

sporadic, see Figure 2. Sale Patterns per Fiscal Year per Store Type. There is no consistent and clear

decrease like the previous year for some stores. What is interesting is that though Store 2 shows the most

sales in Figure 1 and Table 1 however Store 3 shows the most variance across stores in terms of sales.

Store Type 2 has some stores that also have had some spikes in sales but not as high as some of the Stores

in 3’s group. Further testing should be done to see why the sales have been more sporadic for Store Type 2

and 3 particularly the ones that are circled in Figure 2.

In April, a randomized test for stores that have abnormally high sales for dates in April. In Quarter

2, the temperature starts to increase. Quarter 2 months include April, May and June. During these months

in Maine, the temperature is still low but not as cold as the winter months in Quarter 1. What is interesting

about April, most of the Stores showed in April 1st & 2nd, 2016 they had sales that were over $3,200, see

table 2. Below. Compared to the previous fiscal period, the sales were in the high in the same range
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however, there were more store in FY2015 that expressed an increase in sales over $3,000. Why is there

less stores who performed in sales? Based on the sample, a brief review of the stores that over performed

in April can be further performed to see why only a number of stores performed See figure 4 for the

comparison between 1006 on both dates and the performance of the other Store Types.

Table 2
Store 1006 Sales in April
STOR
E STOR WEATHER
LOCA E CENTER LATITU LONGI SN TMA TM
DATE TION TYPE SALES LOCATION DE TUDE WD X IN
CAPE
NEDDICK, -
1-Apr-15 1006 3 3213.59 ME US 43.22411 70.63882 14 47 21
CAPE
NEDDICK, -
2-Apr-15 1006 3 3260.93 ME US 43.22411 70.63882 13 44 22
CAPE
NEDDICK, -
1-Apr-16 1006 3 3213.59 ME US 43.22411 70.63882 0 74 42
CAPE
NEDDICK, -
2-Apr-16 1006 3 3260.93 ME US 43.22411 70.63882 0 74 45

February Sales in 2016 was more sporadic compared to 2015 (baseline) See Figure 5a. In my

analysis, I chose February 7th, a random Sunday to compare sales across stores. Specifically, Friday 7th, for

Store # 1007 see Figure 5b and Table 3 below. Their sales on February 7th in 2016 was abnormally high

compared to last year and it was the only store that reached over $3,500 sales for that day. Store 1029

shows that their sales were significantly lower in February 7th compared to last year where their sale

numbers were greater than $3,500. Store # 1015 also had a significant difference in sales on this date. In

2016, their sales dropped by $676.62. Compare the sales of all three stores, notice that the sales for 1015,

1029 are lower in FY2016 compared to FY15 and store #1007 is a higher compared to 2015 sales. When
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RUNNING HEAD: Souper Bowl, Inc. Case Study

you compare the performance amongst the three and the other stores, notice that the sales for other stores

are performing similarly so why is there a greater discrepancy between the other stores and the three

identified.

Table 3
Store 1007, 1015, and 1029 sales, Temperature and snow fall in February 7th, 2016
STO
RE STO
LOC RE
ATIO TYP WEATHER CENTER LATIT LONGI SN TM TM
DATE N E SALES LOCATION UDE TUDE WD AX IN

7-Feb- CARIBOU MUNICIPAL 46.870 - 20.

15 1007 3 3416.84 AIRPORT, ME US 5 68.0173 1 11 -14
7-Feb- CARIBOU MUNICIPAL 46.870 -
16 1007 3 3695.77 AIRPORT, ME US 5 68.0173 7.1 30 4
-
7-Feb- 43.647 70.6749
15 1015 2 2581.36 HOLLIS, ME US 59 8 30 15 -18
-
7-Feb- 43.647 70.6749
16 1015 2 1904.74 HOLLIS, ME US 59 8 8 35 6
7-Feb- 44.944 -
15 1029 3 3292.87 WESLEY 2 W, ME US 2 67.7086 28 30 -11
7-Feb- 44.944 -
16 1029 3 2948.97 WESLEY 2 W, ME US 2 67.7086 10 33 8

In January sales for Store # 1007, 1029 were different Temperatures between year and months were

warmer however, Store# 1007, had the most sales in FY16 and it was the only store that reached over

$3,600 in sales. Not only did they do it in January, their sales in February was about just shy of the $3,600

but still greater in sales compared to the other two stores, see table 3 for February sales for three stores.

When you compare the two stores to the remaining sample in 2016, the Store Type 3 which is in red have
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RUNNING HEAD: Souper Bowl, Inc. Case Study

sporadic sales while the Store Type 2 & 1 have more of a pattern of sales. Again, another sample to look

into see why they over performed.

Despite region and minimum temperature, there are some discrepancies in performance across

stores. Particularly Store Type 3, why is this Store Type outperforming the other two types?. What is

happening with the accounting practices for Store Type 3? They show the most differences in stores. From

the sample provided, we can look at these stores, 1007, 1029, and 1006 and see why some over performed

whole the others showed a consistent pattern. Analysis should be done to determine if the store inflated

their sales on particular days like February 7th and April 1st-2nd.
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References:

Min Cao, Chychyla, R., & Stewart, T. (2015). Big Data Analytics in Financial Statement Audits.

Accounting Horizons, 29(2), 423–429. https://doi-org.ezproxy.umuc.edu/10.2308/acch-51068

Raphael, J. (2017). Rethinking the audit. Journal of Accountancy, 223(4), 29–32. Retrieved from

http://search.ebscohost.com.ezproxy.umuc.edu/login.aspx?

direct=true&db=heh&AN=122600698&site=eds-live&scope=site