Tableau Assignment
Company Background
You were recently promoted to audit senior at your firm, Aoife & Josephine LLP, and one of your primary clients is Souper Bowl Inc. Souper Bowl (‘‘the company’’) is a privately held business headquartered in Maine, and has a fiscal year-end of December 31. The company has been in business for nine years and prides itself on offering creative soups at a reasonable price and that are made with locally sourced ingredients. The most popular soups include sweet potato corn chowder, curried root vegetable and lentil, and maple-roasted butternut squash. Souper Bowl typically experiences increased sales during winter months since soup hits the spot on a cold and snowy day. To further encourage sales on days when customers often avoid venturing outside, the company provides a delivery service and guarantees that soup can be delivered to anyone no matter what the weather. The company found this strategy to be particularly successful in 2015 when New England (including Maine) experienced record snowfall during February and March.
Souper Bowl sells their soup at several restaurant locations throughout Maine. The company employs three managers that direct the day-to-day operations for a group of stores that are organized by approximate geographic region: northern Maine (Store Type 1), mid-Maine (Store Type 2), and coastal Maine (Store Type 3). Appendix A provides a map of these store locations. Each manager knows their local market well and has the flexibility to advertise and offer promotions with the overall goal of increasing sales year over year. If total sales at the end of the year exceed total sales from the prior year for that manager’s set of locations (i.e., ‘‘Store Type’’), then the manager earns a monetary bonus from the company.
An audit of the company is required to comply with debt covenants related to a large bank loan that the company entered into when it began operations. Specifically, Souper Bowl must provide audited annual financial statements to the bank within 90 days of the fiscal year-end. The company must also provide unaudited quarterly financial statements to the bank within 45 days of the end of each quarter. The debt contract includes a financial covenant that requires pre-tax income in each quarter to be greater than zero. If not met, the bank has multiple remedies at its disposal, including calling the loan such that the entire balance is due immediately, seizing the company’s assets that are posted as collateral, or providing a waiver for the violation. Souper Bowl’s net income for the year ended December 31, 2016 is $468,810, while net income for the prior year ended December 31, 2015 was $825,229.
Based on your experience from prior audits, you know that Souper Bowl’s daily sales fluctuate with temperature and snow accumulation. To perform your revenue analytics, you request a file from the client that includes daily sales by store location for both 2016 (current year) and 2015 ( prior year). You also retrieve daily weather data from the National Oceanic and Atmospheric Administration’s (NOAA) website for the weather centers closest to Souper Bowl’s store locations. Total revenue for the current year ended December 31, 2016 is $18.8 million, while total revenue for the prior year ended December 31, 2015 was $19.1 million. The audit team’s workpapers include the following lead sheet for revenue testing, and the total balances for each year agree to the trial balance and the company’s draft financial statements for 2016.
| Souper Bowl Inc. Revenue Lead Sheet
December 31, 2016 |
PBC | ||||||
| 2016 | 2015 | Change | % Change | ||||
| Revenue, Store Type 1 | $4,062,390.97 | $4,032,383.16 | $30,007.81 | 0.74% | |||
| Revenue, Store Type 2 | 9,331,175.81 | 9,558,584.07 | (227,408.26) | -2.38% | |||
| Revenue, Store Type 3 | 5,425,421.53 | 5,546,767.89 | (121,346.36) | -2.19% | |||
| Total Revenue | $18,818,988.31 | $19,137,735.12 | $(318,746.81) | -1.67% |
Your manager stated that Tableau is a popular data visualization tool that your firm recently adopted and she instructed that you learn how to use it to perform these sales analytics. Since she is busy overseeing the planning and testing of other audit areas, she wants you to take the first pass and then document your results in a memo for her review. The manager wants you to provide thoughtful analyses and a thorough exploration of the possible relationships in the data. You are eager to impress her with your work, especially following your recent promotion to senior.
Requirements
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?
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 below, document your analyses and conclusions as to the specific daily sales from certain locations that you recommend selecting for focused substantive testing.
