Holly's Homegoods: Case Study

Statement of Facts We have completed a review of the inventory and procurement process at Holly’s Homegoods. The specific objectives were to: (a) summarize all information in meaningful methods; (b) verify the appropriateness of purchasing process; (c) evaluate correctness of vendor invoices. Our review was limited to transactions occurred between January 1, 2015 and December 31, 2015.
In conducting the review, we:
• Reviewed the appropriateness of all information provided by client.
• Used IDEA to perform deeper analysis, especially for purchasing process and vendor invoices.
Several issues were discovered which will need the management’s attention.

Identification of Issues
Material Misstatement for Vendor Invoice and Inventory Recalculations of total inventory costs in vendor invoices were performed to check the accuracy of the calculation. After comparing the difference between the recalculated number and the number provided by the vendor, it was found
Among these 10 transactions, one purchase made by Helen Hayes contains unusually larger amount ($191,700). This transaction contains high fictitious purchase possibility. Further investigation for these transactions should be performed to verify the reasonableness of these transactions. Also, the client should improve its purchase system and procedure to avoid the reoccurring of similar situation. In addition, after performing Benford’s Law analysis, it was found that purchasing amount starts with 7 occurred more often than expected. This result shows further investigation is needed as purchase orders in excess of $8,000 are required be approved by CFO. This result could be indicating an abnormal level of transaction being processed just below the approval level.
Segregation of Duties