Audit Readiness Scorecard
Falcon Creek Manufacturing • ENG-2024-0847 • Rules Engine Evaluation
Audit Risk Score
76%
Higher = More Risk
Readiness Score
24%
Higher = More Ready
Overall Status
Rules Engine Evaluation (R100-R900)
R100: Revenue completeness and period cutoff
R100 Family
75%
Finding:
Revenue grew 42% YoY - requires testing
Recommended Action:
Test sample of revenue transactions, verify contracts, assess customer creditworthiness
R200: Accounts receivable valuation and collectibility
R200 Family
50%
Finding:
DSO 80 days (industry: 35) - collectibility risk
Recommended Action:
Test customer confirmations, review aging, assess credit risk, validate subsequent collections
R300: Inventory valuation and NRV testing
R300 Family
75%
Finding:
Inventory increased 41% YoY - NRV testing required
Recommended Action:
Test NRV for all SKU increases, identify slow-moving items, evaluate obsolescence reserves
R400: Purchases authorization and control design
R400 Family
40%
Finding:
Purchases >$50K lack secondary approval - significant control deficiency
Recommended Action:
Implement dual-approval workflow for purchases >$50K; test effectiveness in next period
R500: Payroll and compensation controls
R500 Family
100%
R600: Debt covenants and going concern
R600 Family
100%
R700: Internal control over financial reporting (COSO)
R700 Family
70%
Finding:
Control operating effectively issue
R800: Going concern and liquidity assessment
R800 Family
70%
Finding:
Current ratio 1.10 - liquidity stress
R900: Fraud risk and management override
R900 Family
100%
Readiness by Category
Revenue & Completeness
65%
Inventory & Valuation
70%
Controls & Authorization
50%
Debt & Going Concern
75%
Fraud & Risk
85%
Key Insights
Revenue Risk: 42% YoY growth with new customer concentration requires extensive testing. Focus on revenue completeness, proper period cutoff, and customer creditworthiness.
Control Deficiency: Purchases over $50K lack secondary approval—a significant design gap. Recommend implementing dual-approval workflow and retesting in next period.
Liquidity Watch: Current ratio 1.1x and leverage 2.4x are near covenant limits. Monitor going concern and covenant compliance carefully during fieldwork.
Strengths: Payroll controls stable, fraud risk factors low, adequate going concern indicators. No significant concerns in these areas.
⚠️ Audit Planning Recommendations
- • High-priority areas: Revenue recognition, A/R collectibility, inventory valuation, controls testing
- • Sample sizes: Increase revenue/receivables samples due to growth and concentration
- • Fieldwork focus: Substantive testing for assertions with higher risk ratings
- • Control deficiency: Plan for interim testing of new dual-approval controls if implemented
- • Timeline: Plan 40-50 fieldwork hours minimum; consider extending for control remediation verification