Instructions for Revenue Process “What Could Go Wrong?” (WCGW) AnalysisIn this assignment, you will gain an understanding of the revenue cycle at Earthwear Clothiers
(the example company from the textbook) and will perform a “What Could Go Wrong?”
(WCGW) analysis. WCGW analysis is a technique commonly used in practice (although
sometimes under different names).
You will identify and document FIVE risks specific to Earthwear Clothiers. Start by reading
Exhibit 10-2, which summarizes Earthwear’s revenue process. Ask yourself, “What Could Go
Wrong?” For example, you might identify, “The Company may book sales that have not
shipped.” You will then identify accounts that could become misstated and what assertions
would be violated if this went wrong (e.g., Sales – Occurrence/Cutoff, A/R – Existence).
Then, looking at the flowcharts in Figure 10-2 on p. 340 – 342, as well as the detailed
descriptions of the process on p. 338-347, you will identify one or more key controls that address
this risk. Finally, you will identify how the audit firm could potentially test the controls you
identified. (Hint: The control activities and related tests of controls are discussed in detail on p.
351 – 358. To get the most out of this assignment, try to come up with all of this on your own
first, then you can use those sections to improve your answers. Don’t make the purpose of this
assignment just to “get the right answer.” You’ll learn much more by trying it yourself versus
just copying from the textbook! Plus, you must use your own words). Be sure to write clearly and
concisely.
I have provided an example of what the project will look like on the next page. You may use this
example as one of your five revenue WCGWs that you hand in!
For this assignment, you may work alone or in teams of two. If you work in a team, please
submit only ONE assignment via Canvas and make sure both names are on the assignment,
otherwise only the submitting student will receive credit.
Each WCGW identified will be graded as 2 = Satisfactory, 1 = Needs Improvement, or
0 = Unsatisfactory or Missing. As noted above, you need to identify and analyze FIVE WCGWs.
Due: Sunday, April 21st by 11:59pm via Canvas.
NO LATE ASSIGNMENTS WILL BE ACCEPTED.
See next page for an example of what the assignment should look like:
1
Earthwear Clothiers
What Could Go Wrong Analysis – Revenue Process
Y/E 12/31/21
Name(s):
WCGW #1: The Company could book sales that have not shipped.
Accounts/assertions affected:
Sales – Occurrence/Cutoff
A/R – Existence
Compensating controls:
Billing system should prevent invoicing of sales in the absence of a completed shipping ticket.
Segregation of duties between shipping department and billing department.
Potential tests of controls:
Reperformance – Verify that system cannot invoice without related completed shipping ticket.
Data analytics – Analyze all transactions to ensure all invoices have related shipping tickets with
shipping date prior to invoice date. Investigate/sample from exceptions.
Review org charts for appropriate segregation of duties. Cross-reference personnel with shipping
system access/authority with personnel with invoicing system access/authority to ensure no
overlap. Also consider inquiry and observation.
WCGW #2:
Accounts/assertions affected:
Compensating controls:
2
Potential tests of controls:
WCGW #3: (and so on…FIVE (5) total)
3
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