Circuit Board Inc. Audit Assignment

This assignment provides you with an opportunity to demonstrate the achievement of the following course learning outcomes:

• Implement audit plan strategies by evaluating sample programs for specific accounting cycles, and
• Demonstrate the use and impact of data analytics and current technological advances in auditing, as well as the impact the use of technology by businesses has in providing assurance. 

You are expected to complete this assignment individually.

Respect for academic integrity is crucial to your success. Make sure you understand what constitutes acts of academic dishonesty in the page: What is Academic Dishonesty?

Read the following case background (adapted from Chartered Professional Accountants of Canada, 2020) and the Required section below. Once you have completed reading the background and the Required section, refer to the step-by-step instructions on how to complete Part 1 and Part 2.

Circuit Board Inc. (CBI) is a distributor of computer parts such as circuit boards and memory storage. CBI is located in Calgary, Alberta, and has a small customer base that tends to place regular orders. You, CPA, have just been assigned as the audit senior on the inaugural CBI audit for the period ended December 31, 2018. Previously, CBI had reviews completed by your firm.

 

As senior auditor, you will be responsible for dealing with inventory where professional judgment is required, including valuation of inventory items and analysis of items that may require a writedown. CBI sells an average of 46 items of each type of product per year at an average margin of 24%.

CBI has provided you with an electronic copy of its “inventory cost analysis” and “inventory data log” files for the past three years. The “inventory cost analysis” file includes the master list of the product numbers, cost, and average sales price. The “inventory data log” file shows the quantity sold. CBI provided this information to help you determine if any of the inventory items require a writedown.

To help the company evaluate inventory values, CBI’s accounting system tracks cost and the sales price. One of the key concerns with inventory is whether the items have been recorded at the proper value (valuation of inventory). Inventory should be recorded at the lower of its cost and the net realizable value (that is, the most recent sales price).

To begin your analysis of the inventory, it’s important to obtain a good understanding of CBI’s operations, including the sales demand for each item over the past two years and whether sales for the item are increasing or decreasing.

Submit your response to each of the requirements listed below using screenshots from Power BI and by following the steps outlined in Appendix A.

i. Create a “card” visualization for total sales.

ii. Create a “card” visualization for total number of products.

iii. Create a “cluster column chart” visualization displaying the total sales by product number.

iv. Create a “table” visualization displaying total sales by product number.

v. Create a “cluster bar chart” displaying average margin by product number.

vi. Create a “table” visualization displaying item cost, sales prices for 2016, 2017, and 2018, average sales price, average variance, and average margin by product number.

vii. Using the information above, identify the five products with the lowest margins. For these five products, create a “table” visualization displaying the total quantity sold. Filter the date to show
the quantities for 2016, 2017, and 2018. 

Based on the analysis above, prepare a memo to the audit partner discussing what inventory items are overvalued and the amount of provision CBI should adjust for the December 31, 2018, inventory year end. The partner may wish to discuss the inventory writedown with CBI’s management, so be as specific as possible with your examples and state any assumptions you have made in your analysis.