Client Analytical Procedures Project
ACT 622 Class Project Preliminary
Analytics
Analytical Procedures performed at the Beginning of the Audit, in the Planning Stage
All the firms on the following list are publicly traded retail firm. Choose 4 firms from the
following list. One will be your client firm, and the other three firms will be used to calculate an
average benchmark for comparison. Make a note of the GVKEY and Company Name of the four
companies so you can report them on the template.
Important: Before you start, check the Blackboard Discussion Board to see if anyone else has
claimed the same client firm and three benchmark firms. If no one has claimed your client firm
as their client firm, and no one else has claimed the *same combination* of three benchmark
firms, then post on the discussion board that you will be using these four firms. List the client
name and GVKEY, and the three benchmark names and GVKEYS. The GVKEY is the firm’s
assigned ID number, and you can find it in the data file next to the firm name. Note that it is ok if
someone else is using one or two of your benchmark firms, as long as no one is using all three of
the same benchmark firms.
For example, below you can see that Student 1 signed up first, so no firms were claimed. Student
2 can select Firm A for a client, because no one has chosen Firm A as a client before. Student 2
can also use Firms X, A, and B as benchmark firms, because they have not been used together as
a benchmark by anyone else. Notice that Student 3 has made a mistake! Student 3 can claim
Firm C as a client, but cannot use Firms X, A, and B for his/her benchmark because Student 2
has already claimed this combination. Student 3 should change one of his/her benchmark firms
so that he/she is not using the same exact combination of 3 firms. Firms X, A, and C would be ok
for a benchmark for Student 3.
If you have questions, please send me an email.
Don’t forget to post on the discussion board and claim your firm combinations before you start!
Student 1: Client – Firm X Benchmark – Firm A, Firm B, Firm C
Student 2: Client – Firm A Benchmark – Firm X, Firm A, Firm B
Student 3: Client – Firm C Benchmark – Firm X, Firm A, Firm B
You will need to save 12 lines of data in the spreadsheet: 3 years of data for your client firm, and
3 years of data for each of your 4 comparison firms.
FINAL SUBMISSION OF YOUR WORK
When you are finished, you should upload two files, 1) the dataset you ultimately worked with
and 2) the completed template with ratios and analysis. Make sure to put your name somewhere
inside each document because when I download them for grading, Bb does not attach names. To
upload the file into Bb, look for the “assignment” in Bb with the official title, “Client Analytical
Procedures Project.” Scroll down to find the uploading links for your two files.
FILES FOR COMPLETING THE PROJECT
Data for all the available firms is in File #1. Notice that the data covers three years as follows:
Firm 1 Year 1
Firm 1 Year 2
Firm 1 Year 3
Firm 2 Year 1
Firm 2 Year 2
Firm 2 Year 3
Firm 3 Year 1
…etc. … etc.
File #2 is an Excel spreadsheet containing a template where you will enter the values you
calculate for your client firm and for the benchmark average. Calculate each of the data points
and ratios for 3 years. In the left three columns will be your client firm, in the next three columns
will be the annual average of your three benchmark firms.
On the right side of the template, there is a space to make comments. Start the comments by stating
if the three years of data for your client firm is favorable, unfavorable, or mixed relative to the
three years of data for the benchmark firms. It is not enough to say there is an increase or decrease,
ecause this does not identify whether it is a favorable or unfavorable change.
The most recent years’ data represents your client’s unaudited financial statements. This is the year
you will be auditing, and your job is to evaluate whether, after comparing to the benchmark
firms, there is an increase, decrease, or no change in risk for your audit of this client, relative
to each line item. Explain your reasoning. Consider the audit risk model (control risk,
inherent risk, and acceptable audit risk), identification of significant accounts, and consider
materiality. Using course terminology will demonstrate your comprehension of course
material and improve your grade.
Table 1 below is a legend to let you know what the data a
eviations stand for. You may not
need to use all of these variables.
Table 2 is a summary of the formulas for calculating the ratios.
Table 3 is a list of the firms you may choose from. These are the firms in the database.
As in real life, all of these variables may not be included in the dataset, and all the data in the
dataset may not be required for the final product, but you should have what is necessary to
complete the analytical procedures for the client risk assessment.
Table 1 Data Description
A
eviation Data description
ACT CURRENT ASSETS
AT TOTAL ASSETS
CEQ COMMON EQUITY
CHE CASH AND EQUIVALENTS
CLG CONTINGENT LIABILITIES
DCLO CURRENT PORTION OF LT DEBT
DLTT LT DEBT
IBC INCOME BEFORE DISCONTINUED ITEMS – STMT OF CASH FLOWS
INVT INVENTORY
LCT LIABILITIES CURRENT TOTAL (TOTAL SHORT-TERM LIABILITIES)
PPENT NET PROPERTY PLANT AND EQUIPMENT
RE RETAINED EARNINGS
RECTR TRADE RECEIVABLES
COGS COST OF GOODS SOLD
DVC CASH DIVIDENDS
EBIT EARNINGS BEFORE INTEREST AND TAXES
REVT TOTAL REVENUE
XINT TOTAL INTEREST
XRD R&D EXPENSE
CSHO SHARES OUTSTANDING
PRCC_F FISCAL YEAR END PRICE
Table 2 Ratios
Ratio Name Formula
Cu
ent Ratio ACT/LCT
Quick Ratio CHE/LCT
Operating Cash Flow Ratio IBC/LCT
Receivable Turnover REVT/RECTR
Days Outstanding in Accounts Receivables 365/REVT/RECTR
Inventory Turnover COGS/INVT
Days of Inventory on Hand 365/COGS/INVT
Gross Profit Margin (REVT-COGS)/REVT
Profit Margin EBIT/REVT
Return on Assets EBIT/AT
Return on Equity EBIT/CEQ
Debt to Equity DLTT/CEQ
Time Interest Earned Ratio EBIT/XINT
Market Value PRCC_F * CSHO
Table 3 Companies to Choose From
COMPANY NAMES
CINTAS CORP TALON INTERNATIONAL INC
KATE SPADE & CO COLUMBIA SPORTSWEAR CO
OXFORD INDUSTRIES INC GILDAN ACTIVEWEAR INC
PVH CORP BEBE STORES INC
SUPERIOR UNIFORM GROUP INC DELTA APPAREL INC
UNIFIRST CORP CARTER'S INC
VF CORP IRONCLAD PERFORMANCE WEAR
WACOAL HOLDINGS CORP UNDER ARMOUR INC
NAKED BRAND GROUP INC EVER-GLORY INTL GROUP INC
LVMH MOET HENNESSY LOUIS V KBS FASHION GROUP LTD
VINCE HOLDING CORP LULULEMON ATHLETICA INC
G-III APPAREL GROUP LTD CHINA XINIYA FASHION LTD-ADR
ELLIS PERRY INTL INC RYU APPAREL INC
GUESS INC MICHAEL KORS HOLDINGS LTD
RALPH LAUREN CORP DELTA GALIL INDUSTRIES LTD
TEFRON LTD