Carefully read the Background document - it contains record layout and description of BioPhirma policies and issues. This will guide you in your analysis.Part 1: This part requires an examination of...

Analytics mindset BioPhirma Background Data analytics has been an important part of the accounting profession for many years. However, there are exciting new opportunities due to several significant changes in technology and data availability, including: · The amount and types of data available for analysis have expanded rapidly. · There has been a significant increase in computing power for analyzing data. · Almost all audit evidence is now electronic in nature. In addition, companies are using their data in more sophisticated ways, delivering additional and relevant insight and value. As companies improve their data collection and analyses, they expect auditors, both internal and external, similarly to improve and offer higher quality and more efficient audits. In this era of big data, the use of data analytics during the audit has also received additional interest from regulators and standard setters who continue to underscore the need for a continued focus on the quality of audit work and audit evidence and greater levels of professional skepticism. As a result, auditors have begun to challenge existing practices and look for new ways to embed analytics into all aspects of the audit process. Use of data analytics in fraud prevention and detection Another exciting development in the use of data analytics in the profession is the enhanced ability to prevent and detect fraud. According to the Association of Certified Fraud Examiners’ 2019 Anti-Fraud Technology Benchmarking Report, a survey of professionals from internal audit, professional service firms, governmental and regulatory bodies, and law enforcement organizations representing all industry sectors, there is significant use of various data analytics technologies by their organizations in their antifraud programs.[footnoteRef:1] These organizations identified the use of data analytics as “very beneficial” in the following benefit categories: volume of transactions reviewed (64%); timeliness, such as the speed of detecting anomalies (59%); efficiency, including automating time-consuming tasks (58%); and accuracy, like reducing false positives (45%).[footnoteRef:2] [1: “Fraud & Security Intelligence Survey Results,” SAS Institute Inc. website, https://www.sas.com/en_us/software/visual-analytics/demo/fraud-survey.html, accessed January 28, 2020, 7.] [2: Ibid., 11.] Organizations are also utilizing a large variety of data analytics techniques, with some of the more common being “exception reporting/anomaly detection (64%), automated red flags/business rules (54%), data visualization (35%), predictive analytics/modeling (30%), link analysis/social network analysis (22%), text mining (18%) and geographic data mapping (16%).”[footnoteRef:3] [3: Ibid., 7.] The risk areas more commonly targeted by companies using data analytics include “purchasing (41%), disbursements (38%), fraud by customers/first-party fraud (35%), travel and entertainment (34%) and financial reporting fraud (31%).”[footnoteRef:4] In terms of data used for these analyses, almost three-quarters use internal structured data to conduct their antifraud analytics tests. “In contrast, only 30% of organizations use internal unstructured data, and 26% gather data from employee devices that are connected to the organization’s network. Some organizations are also bringing in data from outside sources, such as public records (43%), government watch lists (32%), social media (29%), and other third-party data sources (27%).”[footnoteRef:5] [4: Ibid., 9.] [5: Ibid., 27.] In highlighting the importance of the need for skills in the area of data analytics, as well as other emerging technologies, 73% of companies identified that this was a major or moderate challenge.[footnoteRef:6] More details about this survey can be found at www.sas.com/fraudsurvey. [6: Ibid., 19.] Company background BioPhirma is an innovative, health care leader conducting extensive research and development activities to invent and test medications and treatments for a wide array of human and animal conditions. BioPhirma is a global company headquartered in Atlanta, Georgia. It employs approximately 25,000 employees worldwide. Because of the diversity of products under development, BioPhirma has distinct, dedicated labs for each product. Each lab is supervised by a chief scientist. The chief scientist’s primary responsibility is to develop innovative products that eventually will be used to treat and heal patients. However, the chief scientist also is responsible for ensuring that the lab is in compliance with all requisite laws and regulations, supervising the lab’s employees and managing the lab’s budget. To facilitate the purchase of items required in the lab, BioPhirma has issued purchase cards (P-cards) to various individuals at each lab. P-card process Employees who are designated as cardholders can make purchases in accordance with BioPhirma’s P-card policies (see Appendix A). P-cards act like regular credit cards, but the transactions are recorded in the CARD system, which is software provided by the bank to record all P-card transactions. After the transaction is complete, the employee is required to go into the CARD system to sign off that the charge on the card is valid, acknowledge that they made the purchase and enter a detailed purchase description. After the employee signs off, a notification is sent to the supervisor (chief scientist or departmental supervisor) to request approval. Once reviewed and approved, the supervisor accesses the CARD system to sign off. Regardless of the sign-off by either the cardholder or the supervisor, the CARD system automatically sends transactions in batches periodically to the Accounting Department to post to the general ledger. This posting date and time is indicated in the CARD system. Management performs a monthly review and follow-up of transactions above single and monthly transaction limits. Anonymous tip about fraud at BioPhirma Recently, an anonymous tip was called in on BioPhirma’s whistle-blower hotline. The tip suggested that some P-card holders were violating BioPhirma’s policies and that fraud may have been committed. No more specific information was provided. Investigation requested BioPhirma’s CEO, CFO and Board of Directors are committed to being good stewards of the company’s (and its shareholders’) resources and has contracted with your company to perform an investigation to determine compliance with its P-card policies in response to the tip. They have provided you with an entire set of P-card transactions from the previous year (fiscal year 2019) and asked that you conduct a thorough review. At the end of your review, you will provide these stakeholders with a presentation of your findings. The CFO has extracted the P-card data from BioPhirma’s enterprise resource planning system and provided it directly to you in the file titled, Analytics_mindset_case_studies_BioPhirma.xlsx. The CFO told you that there were 79,085 transactions made using a BioPhirma P-card during the 2019 fiscal year (note that BioPhirma has a June 30 year-end) with a total spend for the year of $19,861,981. The data file contains the following fields for each of the three tabs in the workbook: Transactions tab Field name Field description Txn Number Transaction number assigned by the system for each P-card transaction Post Date Date the transaction was completed (and posted in the CARD system) Post Time Time the transaction was completed (and posted in the CARD system) Receipt Status Indicates if a receipt has been submitted Employee Name Employee who made the purchase CH Sign-off Date Date cardholder acknowledges purchase in the CARD system; may occur after the posting date CH Sign-off Time Time cardholder acknowledges purchase in the CARD system Vendor Name Vendor with which transaction occurred Amount Total amount of the transaction Item Total Amount of an individual item purchased within a transaction Sum of Item Totals for a transaction should equal the value of Amount for that transaction Item Tax Sales tax paid on the item in the transaction (amount already is included in the Item Total and Amount) Note: Because BioPhirma is a scientific organization, it is exempt from most sales taxes. GL: Department General ledger code for the department that made purchase GL: Account # General ledger account number GL: Object Code General ledger object code Department Name Name of department that made the purchase Grp Owner Name Name of the chief scientist (or another supervisor) responsible for the department’s budget Owner Sign-off Date Date the department owner signed off on transaction in the CARD system; may occur after the posting date Owner Sign-off Time Time the department owner signed off on transaction in the CARD system Acct Sign-off Date Date the Accounting Department posted the transaction in the general ledger Acct Sign-off Time Time the Account Department posted the transaction in the general ledger Comments Descriptions of transaction entered into the system. Note, sometimes these are the defaults from the PCard company (like you would find on a credit card statement), but the purchaser is required by policy to go into the system and provide accurate details. Approved Vendors List tab Field name Field description Vendor Name Name of the approved vendor Mailing Address Street and other mailing address information of the approved vendor City City of the approved vendor State State of the approved vendor Zip ZIP Code of the approved vendor Sales Contact Name Name of the sales contact of the approved vendor Contact Phone Number Phone number of the sales contact of the approved vendor Authorized P-card Users tab: Field name Field description Full Name Last name, first name of the authorized P-card user Last Name Last name of the authorized P-card user First Name First name of the authorized P-card user Email Email address of the authorized P-card user Street Address Street address of the authorized P-card user City City of the authorized P-card user State State of the authorized P-card user Zip Code ZIP Code of the authorized P-card user Phone Number Phone number of the authorized P-card user Single Transaction Limit Approved Single Transaction Limit of the authorized P-card user Appendix A: BioPhirma P-card policies What is a purchasing card? The BioPhirma purchasing card (P-card) is a valuable tool for quickly and efficiently purchasing and paying for small-dollar-amount items for the business without sacrificing control or cost. Cardholders act as a purchasing agent for BioPhirma. The card may be used as the method of payment for unplanned, non-routine or urgent purchases of goods and services at authorized vendors under authorized limits. The total value of the purchase should be included when considering the purchase limit and, as such, the total value includes shipping, handling charges, insurance, etc. P-cards can be used in person, over the phone, via fax, and via the internet or by mail. The P-card can only be used for BioPhirma-related business for which company funds will be disbursed. The P-card should never be used for personal purchases. Who can get a P-card? A P-card may be issued only to permanent employees (part-time or full-time) of BioPhirma whose job duties require the use of a P-card. Cards are issued to individual employees only, rather than to a specific department or division. No more than one card may be issued to an employee. Cardholder spending limits The available limits on a P-card include: · Single Transaction Limit (STL) – P-card users are authorized at different STL levels, as determined appropriate by the P-card issuer and department supervisor. These amounts are documented in the Authorized P-card Users file. Level Amount Level 1 $250 Level 2 $500 Level 3 $1,000 Level 4 $1,500 Level 5 $2,000 Level 6 $2,500 Level 7 $5,000 · Monthly Transaction Limit (MTL) – The monthly limit on the dollars spent per month should not exceed $10,000 per month for any P-card user. Additional unallowable P-card practices A. Splitting transactions Splitting transactions on the BioPhirma P-card is prohibited. Transaction splitting is the practice of committing multiple P-card transactions to circumvent the cardholder’s single transaction limit, monthly transaction limit or bypass BioPhirma’s competitive bidding requirements. Examples could include: · Transactions split between two (or more) transactions by one employee with one vendor · Transactions split between two (or more) BioPhirma employees · Transactions split between two (or more) vendors B. Limitations on vendors that can be used Cardholders can only make purchases from authorized P-card vendors. These vendors are documented in the Approved Vendors List. Cardholders must not make P-card purchases from friends or relatives wherein the cardholder has a financial interest. Additionally, the cardholder must not accept any gift or gratuity from any source when it is offered, or appears to be offered, to influence a decision in making a P-card purchase. C. P-card sharing Only the person named on the P-card is the authorized user. P-card sharing is prohibited. Analytics mindset case studies – BioPhirma 1 © 2020 Ernst & Young Foundation (US). All Rights Reserved. SCORE no. 08247-201US_3 Analytics mindset case studies – BioPhirma 7 © 2020 Ernst & Young Foundation (US). All Rights Reserved. SCORE no. 08247-201US_3 Biophirma Biophirma Analytics mindset BioPhirma Part 1: Ask the right questions Required: · Review the P-card policies for BioPhirma (see Appendix A). · Complete the table below providing the following: · Identify at least three risks BioPhirma faces related to its P-card transactions wherein it has put a control in place to address the risk. · Identify the controls it has already implemented around these risks. · Identify which type of data analysis, if any, you could perform to test the controls you have identified. Risk Control Data analysis · Identify at least one recommendation to make to BioPhirma’s management about an additional control or process change to consider implementing to address risks related to its P-card transactions. Analytics mindset case studies – BioPhirma 1 © 2020 Ernst & Young Foundation (US). All Rights Reserved. SCORE no. 08247-201US_3 Analytics mindset case studies – BioPhirma 10 © 2020 Ernst & Young Foundation (US). All Rights Reserved. SCORE no. 08247-201US_3 Transactions Txn NumberPost DatePost TimeReceipt StatusFull NameCH Signoff DateCH Signoff TimeVendor NameAmountItem TotalItem TaxGL: DepartmentGL: Account #GL: Object CodeDepartment NameGrp Owner Full Name Owner Signoff DateOwner Signoff TimeAcct Signoff DateAcct Signoff TimeComments TXN012989047/2/1811:45:00 AMRivera, Julie7/4/186:15:53 AMPAW L & L PAINT CONTRA$675.00$675.00$0.002671021RR26745171500Business Outreach SvcsMassey