Question

AP8.6 (LO 4) An icon reads, Challenging Performing ADA involving matching A team from More & Less CPAs are auditing SportsLovers, a U.S. sporting goods manufacturer and distributor. The audit team recently had a meeting to discuss how to perform the current ADA, which is designed to investigate the risk of employees stealing by shipping products to their home address. The team has already completed the first three steps of the five-step ADA process. The discussion point in the meeting was how to compare the addresses in the Employee Master File with the addresses in the Shipment List File. The relevant fields in each database are shown below.

Database
Field Code
Field Description
Data Type

Employee Master File
E_ID
A unique identification number for each employee
6-digit number

E_ADD
Employee’s home address excluding city, state, zip code
Text

E_CITY
City associated with E_ADD
Text

E_STATE
State associated with E_ADD
Text

E_ZIP
Zip code associated with E_ADD
5-digit number

E_COUN
Country associated with E_ADD (currently US for all employees but stored in case of future expansion)
Text

Shipment List File
SHIP_NO
A unique identification number for each package shipped
8-digit number

INV_NO
The invoice number the shipped package belongs to
8-digit number

SHIP_ADD
Shipping address excluding city, state, zip code
Text

SHIP_CS
City and state (separated by a comma) associated with SHIP_ADD
Text

SHIP_ZIP
Zip code associated with SHIP_ADD
5-digit number

SHIP_COUNTRY
Country associated with SHIP_ADD (currently US for all employees but stored in case of future expansion)
Text

During the meeting, the following ideas were proposed for a criterion to identify notable items:

1)E_ADD is the same as SHIP_ADD.
2)E_ZIP is the same as SHIP_ZIP.
3)The result of joining E_ADD, E_CITY, E_STATE, and E_ZIP is the same as joining SHIP_ADD, SHIP_CS, and SHIP_ZIP.
4)E_NUMS is the same as SHIP_NUMS. E_NUMS is created by joining E_ADD and E_ZIP together and then removing all letters so only the numbers remain. In a similar way, SHIP_NUMS is created by joining SHIP_ADD and SHIP_ZIP and retaining only the numbers.

Critically analyze the advantages and disadvantages of each of the four suggestions.
Recommend a criterion to identify notable items and justify your choice.
Evaluate the risk of missing truly notable items given your recommendation in (b).

Answer 1

The four criteria to identify potential employee theft through shipping address comparisons have varying levels of comprehensiveness and potential for missing discrepancies due to formatting and deliberate obfuscation.

Step-by-step explanation:

The student's question involves an auditing process by CPAs, specifically about the Challenging Performing ADA task which requires analyzing employee theft risk by comparing employee addresses with shipment addresses. The four proposed criteria to identify notable items each have benefits and drawbacks.

• Criterion 1: E_ADD matches SHIP_ADD has the advantage of direct address comparison but may miss variations in address formatting. It's simple but not comprehensive.
• Criterion 2: E_ZIP matches SHIP_ZIP checks for postal area matches and is quick to compare but may overlook that different addresses can share the same ZIP code.
• Criterion 3: Joining E_ADD, E_CITY, E_STATE, and E_ZIP matches SHIP_ADD, SHIP_CS, and SHIP_ZIP provides a thorough comparison but may be affected by address inconsistencies.
• Criterion 4: E_NUMS matches SHIP_NUMS, involves numeric pattern matching which ignores letters, potentially missing theft by altering address letters without changing numbers.

The recommended criterion would be the third option, as it offers the most comprehensive check despite potential issues with address inconsistencies. However, the risk of missing truly notable items remains if the addresses are not formatted consistently or if there are deliberate attempts to obfuscate the theft by tweaking the address details slightly.

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