Project Information: The owner of a small snack food and potato chip manufacturer, California Crunch Company, has asked you to investigate a possible issue with the company’s payroll. They have provided you with this year and last year’s income statements and two payroll files. The “HR Master” file gives you important information about each employee. The “Payroll” file details the company’s payroll for the last 5 pay periods of the year. You will be conducting some audit procedures for California Crunch and analyzing the results.
Using the two analysis test files provided
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Prepare a 2-3 page analysis discussing what you found as a result of your analysis and what internal controls you would recommend to the owner of California Crunch Co.
After doing an analysis of the HR Master excel file on IDEA I found 8 records of employees with the same employer ID number.
Moreover, I did another test and found that there are two employees with the same social security number.
I did an additional test to check for duplicates of addresses and found two records of employees with the same address.
Here are the history logs for the analysis:
Horizontal Analysis
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| |
| California Crunch Company |
|
| Statements of Income |
| Increase (Decrease) |
|
| For the year ended December 31, |
| 2018 |
| 2017 |
Amount |
Percent |
|
| Net Sales (less returns & allowances) |
| $ 8,353,542 |
| $ 7,998,832 |
$ 354,710 |
4.43% |
|
| Cost of Goods Sold |
| $ 3,745,623 |
| $ 3,621,532 |
$ 124,091 |
3.43% |
|
| Gross Margin |
| $ 4,607,919 |
| $ 4,377,300 |
$ 230,619 |
5.27% |
|
| Operating Expenses: |
|
| Advertising |
| $ 115,325 |
| $ 113,452 |
$ 1,873 |
1.65% |
|
| Bad Debt Expense |
| $ 65,232 |
| $ 62,585 |
$ 2,647 |
4.23% |
|
| Depreciation and Amortization |
| $ 75,210 |
| $ 73,565 |
$ 1,645 |
2.24% |
|
| Dues & Subscriptions |
| $ 600 |
| $ 575 |
$ 25 |
4.35% |
|
| Insurance |
| $ 60,800 |
| $ 60,600 |
$ 200 |
0.33% |
|
| Licenses & Fees |
| $ 300 |
| $ 285 |
$ 15 |
5.26% |
|
| Marketing & Promotion |
| $ 52,632 |
| $ 51,025 |
$ 1,607 |
3.15% |
|
| Meals and Entertainment |
| $ 25,030 |
| $ 24,345 |
$ 685 |
2.81% |
|
| Office Expenses |
| $ 14,325 |
| $ 14,652 |
$ (327) |
-2.23% |
|
| Office Supplies |
| $ 24,003 |
| $ 23,458 |
$ 545 |
2.32% |
|
| Salaries & Wages |
| $ 2,380,105 |
| $ 2,192,032 |
$ 188,073 |
8.58% |
|
| Professional Fees |
| $ 39,700 |
| $ 38,500 |
$ 1,200 |
3.12% |
|
| Property Taxes |
| $ 19,220 |
| $ 19,000 |
$ 220 |
1.16% |
|
| Rent |
| $ 85,230 |
| $ 84,360 |
$ 870 |
1.03% |
|
| Repairs & Maintenance |
| $ 1,450 |
| $ 1,500 |
$ (50) |
-3.33% |
|
| Shipping Delivery |
| $ 770 |
| $ 730 |
$ 40 |
5.48% |
|
| Travel Expenses |
| $ 75,830 |
| $ 73,560 |
$ 2,270 |
3.09% |
|
| Utilities |
| $ 35,230 |
| $ 34,250 |
$ 980 |
2.86% |
|
| Leased Equipment |
| $ 44,000 |
| $ 43,750 |
$ 250 |
0.57% |
|
| Other |
| $ 15,320 |
| $ 14,756 |
$ 564 |
3.82% |
|
| Total Operating Expenses |
| $ 3,130,312 |
| $ 2,926,980 |
$ 203,332 |
6.95% |
|
| Operating Income |
| $ 1,477,607 |
| $ 1,450,320 |
$ 27,287 |
1.88% |
|
| Interest Expense |
| $ 84,658 |
| $ 83,950 |
$ 708 |
0.84% |
|
| Other Income (interest, royalties) |
| $ 5,920 |
| $ 5,725 |
$ 195 |
3.41% |
|
| Income Before Taxes |
| $ 1,398,869 |
| $ 1,372,095 |
$ 26,774 |
|
| 1.95% |
|
| Income Taxes |
| $ 489,604 |
| $ 480,233 |
$ 9,371 |
1.95%
|
| Net Income |
| $ 909,265 |
| $ 891,862 |
$ 17,403 |
1.95%
Vertical Analysis
California Crunch Company
Statements of Income
For the year ended December 31, 2018
|
| % of Net Sales |
2017 % of Net Sales
Net Sales (less returns & allowances) $ 8,353,542
|
| 10
|
| 0.00% |
$ 7,998,832 100.00%
Cost of Goods Sold $ 3,745,623
| 44.84% |
$ 3,621,532
45.28% |
Gross Margin $ 4,607,919
| 55.16% |
$ 4,377,300
54.72% |
Operating Expenses:
Advertising $ 115,325
| 1.38% |
$ 113,452
1.42% |
Bad Debt Expense $ 65,232
|
| 0.78% |
$ 62,585 0.78%
Depreciation and Amortization $ 75,210
| 0.90% |
$ 73,565
| 0.92% |
Dues & Subscriptions $ 600
|
|
|
| 0.01% |
$ 575 0.01%
Insurance $ 60,800
| 0.73% |
$ 60,600
0.76% |
Licenses & Fees $ 300 0.00% $ 285 0.00%
Marketing & Promotion $ 52,632
| 0.63% |
$ 51,025
0.64% |
Meals and Entertainment $ 25,030
|
| 0.30% |
$ 24,345 0.30%
Office Expenses $ 14,325
| 0.17% |
$ 14,652
|
| 0.18% |
Office Supplies $ 24,003
|
| 0.29% |
$ 23,458 0.29%
Salaries & Wages $ 2,380,105
| 28.49% |
$ 2,192,032
27.40% |
Professional Fees $ 39,700
|
| 0.48% |
$ 38,500 0.48%
Property Taxes $ 19,220
| 0.23% |
$ 19,000
0.24% |
Rent $ 85,230
| 1.02% |
$ 84,360
| 1.05% |
Repairs & Maintenance $ 1,450
|
| 0.02% |
$ 1,500 0.02%
Shipping Delivery $ 770 0.01% $ 730 0.01%
Travel Expenses $ 75,830
| 0.91% |
$ 73,560 0.92%
Utilities $ 35,230
| 0.42% |
$ 34,250
0.43% |
Leased Equipment $ 44,000
| 0.53% |
$ 43,750
0.55% |
Other $ 15,320 0.18% $ 14,756 0.18%
Total Operating Expenses $ 3,130,312
| 37.47% |
$ 2,926,980
36.59% |
Operating Income $ 1,477,607
| 17.69% |
$ 1,450,320
18.13% |
Interest Expense $ 84,658
| 1.01% |
$ 83,950 1.05%
Other Income (interest, royalties) $ 5,920
|
| 0.07% |
$ 5,725 0.07%
Income Before Taxes $ 1,398,869
| 16.75% |
$ 1,372,095
17.15% |
Income Taxes $ 489,604
| 5.86% |
$ 480,233
6.00% |
Net Income $ 909,265
| 10.88% |
$ 891,862
11.15% |
