Burlington Bees: Using Analytical Procedures as Substantive Tests
Burlington Bees: Using Analytical Procedures as Substantive Tests
The determination of the occurrence of revenues is an important of the audit process. One substantive audit procedure that can be used to confirm whether the occurrence of the ticket sales revenues for Burlington Bees is valid is the checking the ticket sales documents and records from the ticketing systems. In most games, the fans are given tickets and the company is left with some copy to prove the ticket sales. The physical check and sampling of the tickets sold will be useful and give more accurate information about the inherent validity of the ticket sales revenues. The physical verification of the ticket invoices and copy of the documents will help in determining the occurrence of the ticket sales in the organization. The management of Burlington Bees will need to hire additional personnel to confirm the details and information of the ticket sold and their actual figures. The additional employee helps to improve accountability and transparency in the ticketing system.
The difference between the purpose of analytical procedures conducted during the planning phase and the analytical procedures performed during the test work is that the analytical procedures conducted during test work seek to check the validity and accuracy of the transactions. On the other hand, the analytical procedures performed during the planning stage serves as a way of projecting good ticket sales in comparison with the other sports teams or the industry. Unlike the planning phase, the analytical procedures conducted during test work are more detailed due to the presence of actual data and information about the ticket sales performance.
One analytical procedure that might be conducted during the planning phase to check Burlington Bees’ ticket sales revenues for the current year is reviewing the ticket sales revenue accounts for the past years and comparing them with other sports teams in the same league. The review of the sales ticket revenue accounts and transactions will give proper information about expected financial performance of the sports organization. For example, quarterly financial statements could be used to benchmark on the changes of the ticket sales revenues over past periods. The analytical procedure will be effective in improving the planning process of the audit in Burlington Bees.
Assuming the reported revenue on the income statement is $2,580, 420, there is an audit difference of $16,98,24 relying on the totoal expected revenue of $2,563,433.76. The materility guideline proposes that the overall mistatemets in the income statement should be recorded at a range of 5% to 10% of the overall operating income before tax deduction. However, the misstatement was out of range of the reasonable misstament. Based on the materiality basis, it is clear that the reported revenue is not reasonable. The accountant should give additional information to justify the reported figures as it contradicts the expected revenues for the year.
The potential reasons for the unreasonable misstatment in the incoem statement includes that the attendance number might bave been wrong or the unusual transactions were incorrectly documented. However, the two potential statements should be justified with clear evidence to prove that the reported figures in the income statement was not intentioally misleading. It is important for the management to ensure that the correct sales revenues figures are documented. In such an organization, the report of the sales revenues is essential as it is core source of revenue for the company.
Appendix 1: Estimate of Ticket Sales Revenues
Assuming the Park Attendance is full 434,348 people will attend the games.
Sales Mix Weekday Weekend
Club seats 30% 25%
Box seats 35% 30%
General seat: Adult 20% 25%
Child (senior citizens) 15% 20%
