Description

ABSTRACT: 

Workpaper review is an important quality control mechanism in the audit environment. However, appropriately responding to review notes is not commonly taught. The Sprandel, Inc. case provides a hands-on learning experience for students to connect textbook audit knowledge through use of an activity regularly performed in audit practice: closing review notes. Through the process of closing review notes, students practice auditing accounts receivable, including performing audit procedures related to internal controls and substantive audit work. The case also provides students with an opportunity to use Excel to complete electronic workpapers and to document their audit procedures. Further, the case requires students to use critical-thinking skills and apply professional skepticism when performing audit procedures, evaluating audit evidence, and making decisions. Finally, this case helps students understand how auditing standards apply to the procedures performed during an audit of accounts receivable. The case is designed for auditing courses at the undergraduate or graduate level.

Introduction and Background 

Sprandel, Inc. is a publicly held, mid-sized manufacturer of plastic bottles, and is classified as an accelerated filer by the U.S. Securities and Exchange Commission. In 1987, the company was founded by a young entrepreneur who was interested in creating plastic bottles in shapes and sizes that were unique and affordable to customers who needed packaging for an assortment of products such as food, drinks, automotive oil, and personal care products. Sprandel’s claim to fame is that the company is the first bottle manufacturer to produce a line of ‘‘honey bear’’ bottles. The company started as one facility in Tulsa, Oklahoma, but Sprandel has since expanded to six facilities in Oklahoma, Wisconsin, and Maryland. These facilities collectively house 35 production lines. Sprandel produces 74 different stock bottles in various shapes and sizes and can produce custom bottles based on customer specifications. Over the past 30 years, Sprandel’s management has strived to take a long-term view with respect to investment in equipment, employees, and customers. Carty and Plews LLP has audited Sprandel’s financial statements for the last four years. Over those years, Sprandel has consistently reported positive earnings and has had a small but steady increase in revenues, consistent with the industry trend