ACC

ISSUES IN ACCOUNTING EDUCATION American Accounting Association
Vol. 35, No. 1 DOI: 10.2308/iace-52584
February 2020
pp. 13–24

The Reel Wheel: Using Analytical Procedures as Substantive
Tests of Account Balances

Jason L. Smith
University of Nevada, Las Vegas

Nathaniel M. Stephens
Utah State University

ABSTRACT: This case provides students an introductory experience to substantive analytical procedures in a
realistic audit setting. Students are presented with a scenario, adapted from a real-world example, requiring them to

(1) research relevant auditing standards, (2) develop an independent expectation for a client’s revenue account, and

(3) consider the precision of the estimate, additional audit procedures, and the reliability of the underlying data and

evidence obtained. In completing the case, students will learn to: (1) explain the benefits and challenges of using

substantive analytical procedures, (2) research relevant auditing standards, (3) create and analyze relevant

substantive analytics, (4) evaluate the appropriateness of data aggregation in substantive analytical procedures, and

(5) discuss factors affecting the reliability of data used by the auditor. The case is typically assigned as an out-of-

class assignment, combined with a subsequent in-class discussion. It can be used in either undergraduate or

graduate auditing courses.

Keywords: substantive analytical procedures; disaggregated data; data analytics.

I. CASE

C
oliseum Entertainment Corporation is one of the world’s largest hotel and gaming entertainment companies. Coliseum

is a publicly-traded company; its stock trades on the New York Stock Exchange (NYSE) under the CEC ticker

symbol. The company, which first went public in 1973, is currently experiencing financial pressure stemming from

debt obligations incurred as part of its recent acquisition of a large competitor. One of Coliseum’s strategies to increase revenue

has been to expand entertainment offerings and encourage increased traffic to its existing hotel and gaming properties. With this

strategy in mind, Coliseum constructed a new attraction, the Reel Wheel, which opened on April 1, 20X4.

The Reel Wheel

The Reel Wheel is an observation wheel located at a new outdoor mall situated between two of Coliseum’s hotel properties

on the Las Vegas Strip. The Reel Wheel is the largest observation wheel in the world, standing 550 feet tall. It has 28

observation cars, each holding up to 40 people. The cars have 225 square feet of interior space, and each weighs roughly 44,000

pounds. It takes approximately 30 minutes for the wheel to make a complete rotation.

The Reel Wheel operates daily—year-round—with observation cars departing from 11:00 a.m. to 2:00 a.m., with the

exception of four service days. Cars departing between 11:00 a.m. and 5:00 p.m. are considered ‘‘day time’’ rides; those

departing between 5:00 p.m. and 2:00 a.m. are considered ‘‘night time’’ rides. During night time operations, the wheel lights up

with more than 2,000 LED lights that bathe the wheel and its riders in a rainbow of bright and colorful lights.

We appreciate helpful comments and suggestions provided by Allen D. Blay (associate editor), Greg Bleazard, CPA, and Valaria P. Vendrzyk (editor), as
well as the anonymous journal reviewers in the development of this case. We also thank the accounting practitioners who helped in developing the case
setting and the students who have provided insights regarding their experiences with the case. Professor Smith gratefully acknowledges the financial
support of the EY Faculty Fellowship at the Lee Business School at the University of Nevada, Las Vegas, and Professor Stephens is grateful for the
support of the Jon M. Huntsman School of Business at Utah State University. All errors are our own.

Supplemental materials can be accessed by clicking the links in Appendix B.

Editor’s note: Accepted by Allen D. Blay, under the Senior Editorship of Valaria P. Vendrzyk.

Submitted: October 2018
Accepted: September 2019

Published Online: October 2019

13

Within each of the 28 observation cars, interior lighting, TV monitors, music, and sound effects entertain guests

while the wheel is in motion. Although Coliseum primarily displays its own advertising images in each of the observation

cars, it also sells advertising space to complementary businesses. The Reel Wheel also generates revenue through the sale

of food and beverages, photos, and Coliseum-themed souvenirs from a gift shop located at the base of the observation

wheel.

Because of the allure of seeing the Las Vegas Strip at night, ‘‘night time’’ rides are charged a premium. Children 12 and
under always ride free on the Reel Wheel, and Las Vegas locals receive a 40 percent discount off of regularly-priced tickets. In

order to entice more people to ride the Reel Wheel during the hottest summer months, a discounted price structure ($5.00 off

each ticket) was offered during the third quarter of 20X5 (July through September). Locals are not eligible for the summer

pricing structure, but they continue to get 40 percent off of regular ticket prices.

In addition to selling tickets to tourists and locals, the Reel Wheel also sells tickets in wholesale batches to travel agencies,

local hotels, and other tourism-related services that bundle the tickets together with vacation packages and other offerings. The

wholesale ticket prices do not vary based on time of day or season.

Coliseum’s Annual Audit

Coliseum has engaged one of the largest public accounting firms in the world to conduct the annual audit of its financial

statements. The engagement audit partner has asked you, a third-year associate with the firm, to oversee the audit of Ticket

Sales Revenue generated by the Reel Wheel during the 20X5 calendar year. Coliseum’s unaudited reported Ticket Sales

Revenue balance for the year is $73,468,219. The amount of tolerable difference (a.k.a., tolerable error) allocated to this

account is $675,000. The underlying internal controls related to ticketing revenue have been tested, and no significant

deficiencies or material weaknesses were identified.

II. CASE REQUIREMENTS

Given the nature of the Reel Wheel’s operations and ticket revenue transactions, the audit partner encourages you to use

substantive analytical procedures to develop an independent expectation of Ticket Sales Revenue and to use that estimate as

evidence in evaluating the reasonableness of Coliseum’s reported Ticket Sales Revenue for the Reel Wheel’s operations during

the year.

Part 1: Understanding the Audit Concept

After reading the case materials, please take a few minutes to search through the PCAOB’s auditing standards to identify

the one(s) governing the use of substantive analytical procedures. Refer to and cite these standard(s) as you complete the

following tasks. (The Case Requirements are available for download, see the link in Appendix B.)

1.1 After studying the relevant auditing standards, draft a brief memo to address the following issues. Be sure to cite the

appropriate paragraphs of relevant standards to justify your responses to each bulleted item.

� How and in what contexts may substantive analytical procedures be used during the course of a financial statement
audit?

� Are substantive analytical procedures allowed to be used as audit evidence?
� What specific assertions related to the Ticket Sales Revenue account balance could a substantive analytical procedure

be used to test?
� Does the Ticket Sales Revenue account include ‘‘predictable relationships’’ required to develop an independent

expectation?
� Why do you think a substantive analytical procedure might be more effective and efficient than tests of details for the

Ticket Sales Revenue account?

1.2 What do the auditing standards mean when they refer to the ‘‘precision’’ of an expectation developed with a
substantive analytical procedure? What do the standards suggest that you could do to improve the ‘‘precision’’ of your
expectation for Ticket Sales Revenue?

1.3 Does the data provided to you for the purpose of conducting the audit of the Reel Wheel’s Ticket Sales

Revenue meet the requirements regarding the reliability of underlying data? How does the source of the

information affect its reliability? Are there external sources that might be used to validate portions of the data

provided by the client?

1.4 As indicated in the standards, briefly describe the required steps for documentation of substantive analytical

procedures.

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Part 2: Performing the Audit Procedure

As part of the annual audit of Coliseum Entertainment’s 20X5 financial statements, the engagement audit partner has

encouraged you—a third-year associate auditor—to develop a substantive analytical procedure to test Coliseum’s 20X5 Ticket

Sales Revenue account for the Reel Wheel attraction.

After carefully reviewing the appropriate auditing standards, you approach the appropriate personnel at Coliseum and

request the data needed to create your data analytics. Appendix A of this case contains a copy of the requested data related to

Ticket Sales Revenue generated by the Reel Wheel during 20X5 (Appendix A is available for download, see the link in

Appendix B).

Use Excel to create analytics showing your solutions to the following three questions. Use separate tabs to show your work

in analyzing each question.

2.1 In order to better understand whether the number of Total Passengers in 20X5 (as reported by Coliseum) is reasonable,

develop a quick estimate of the maximum number of passengers possible during 20X5. In other words, how many

passengers could ride on the Reel Wheel if every passenger car was filled to capacity for the entire year? In addition to

documenting maximum capacity, show how many passengers would have experienced the Reel Wheel if it ran at 75

percent, 50 percent, and 25 percent of maximum capacity. Refer to the client data you requested, and document the

percentage of total capacity that the client’s reported number represents. Based upon your capacity calculations, does

the number of reported passengers seem reasonable?

2.2 Develop an independent estimate of Ticket Sales Revenue using just the highly aggregated data available in the case

(e.g., Total Passengers, Average Ticket Price). Evaluate this independent estimate by comparing it to the client’s

reported account balance. Determine if the reported balance is within a tolerable range (i.e., the client’s reported

amount plus or minus the tolerable error specified in the case) of your independent estimate using this aggregated data

approach.

2.3 Using all of the disaggregated data provided by the client, develop an audit work paper to calculate the most precise

estimate you can for Ticket Sales Revenue in 20X5 at the Reel Wheel. Compare this revised estimate using

disaggregated data with the client’s reported account balance and determine (1) whether or not the client’s amount

appears to be materially misstated and (2) what, if any, additional audit work is required to test the account balance.

Part 3: Reflect on the Engagement

3.1 Given your objective of using the analytical procedure to provide most of the assurance needed regarding the Ticket

Sales Revenue account for the Reel Wheel, is the estimate developed in 2.3 precise enough, or is more precision

needed? Explain.

3.2 Given that much of the data used in your analytical procedure is provided by your client, what additional audit

procedures could you supplement this substantive analytic with to provide additional corroborating evidence that these

ticket sales actually occurred?

3.3 Assuming the client’s controls are effective, how might the auditor use data analytics tools to audit the Ticket Sales

Revenue account? How would the evidence obtained using data analytics (i.e., ability to effectively analyze every

sales transaction during the year) compare with the evidence from both substantive analytical procedures and tests of

details in terms of effectiveness and efficiency? What additional insights might the auditor be able to identify using

data analytics?

3.4 Some companies use a third-party service provider to sell tickets to customers and to collect tickets upon entrance into the

venue. When performing audits of clients who use these third-party service providers, the auditor often relies upon SOC 1

reports provided by CPAs who audited the service provider’s internal controls. There are two types of SOC 1 reports:

Type I and Type II. Research the AICPA’s website and briefly explain what a SOC 1 Type II report is. Consider how your

approach to auditing the Ticket Sales Revenue account might be different if a third-party ticket provider with a SOC 1

Type II report were providing these services for the client and was therefore the source of the ticket sales data you

requested (e.g., number of passengers, ticket prices, seasonality, day time versus night time rides).

The Reel Wheel: Using Analytical Procedures as Substantive Tests of Account Balances 15

Issues in Accounting Education
Volume 35, Number 1, 2020

APPENDIX A

Requested Data Regarding Reel Wheel Ticket Sales

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The Reel Wheel: Using Analytical Procedures as Substantive Tests of Account Balances 17

Issues in Accounting Education
Volume 35, Number 1, 2020

APPENDIX B

iace-52584_Appendix A: http://dx.doi.org/10.2308/iace-52584.s01

iace-52584_Case Requirements: http://dx.doi.org/10.2308/iace-52584.s02

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III. CASE LEARNING OBJECTIVES AND IMPLEMENTATION GUIDANCE

This audit case involves the use of substantive analytical procedures to develop an independent estimate of a client’s sales

revenue account for a particular operating activity. The case, which is based on a portion of an actual audit engagement,

involves three parts designed to help students develop an understanding of and experience developing substantive analytics.

The first part of the assignment directs students to search PCAOB auditing standards to identify those standards relating to the

use of substantive analytical procedures as they draft a memo that responds to five questions designed to help them understand

the benefits, challenges, and objectives of using analytical procedures as a substantive test of account balances. The second part

of the case requires students to develop a series of three analytics, each designed to help students think critically about factors

influencing the precision and reliability of a substantive analytic. The third and final part of the case asks students to reflect at a

high level about the use of substantive analytical procedures, given the specifics of the case.

Prior Literature

In this section we review several other cases relating to substantive analytical procedures and describe some of the

substantive differences between those cases and our own. We separate our discussion of these existing case studies into two

categories—cases published in case books by for-profit institutions, and cases published in peer-reviewed academic journals.

Cases Published in Case Books

While we do not have access to all cases published in case books, we are aware of several published cases that involve

analytical procedures. For example, Beasley, Buckless, Glover, and Prawitt (2015) offer two case studies addressing

substantive analytical procedures: (1) Northwest Bank and (2) Burlingham Bees.

Similar to the Reel Wheel case, the Northwest Bank case requires students to evaluate the results from and reliability of

two sets of analytical procedures, one using more disaggregated data than the other. Unlike the Reel Wheel case, however, the

Northwest Bank case does not require students to research relevant auditing standards or to use available data from the case

narrative to develop their own analytics prior to evaluating their results.

Burlingham Bees is a substantive analytical procedures case in which—like the Reel Wheel case—students use data

provided by the authors to develop an independent estimate of ticket revenue for a baseball team and to respond to a series of

related questions. In contrast, the Reel Wheel case requires a more extensive consideration of auditing standards, which is

required for at least seven requirements in the Reel Wheel case. While Burlingham Bees requires students to develop an

independent expectation for the account balance, the Reel Wheel case requires students to develop three separate expectations,

each with an increasing degree of precision. Finally, Part 3 of the Reel Wheel case requires students to respond to a series of

additional questions regarding precision, underlying data reliability, and the potential influence of a third-party service provider

for ticket sales.

Cases Published in Peer-Reviewed Journals

There is a relative dearth of cases in academic journals that focus on substantive analytical procedures. Although several

published cases contain requirements relating to substantive analytical procedures, most focus on other aspects of the audit

(e.g., consideration of fraud) while containing a single requirement related to analytical procedures (e.g., D’Aquila and

Capriotti 2011, Bagley and Harp 2012). In California Micro Devices by D’Aquila and Capriotti (2011), students are asked to

consider and discuss challenges of using data from prior periods in developing expectations of an account balance. In Shoe

Zoo, Inc. by Bagley and Harp (2012), students perform substantive analytical procedures for testing depreciation expense;

however, unlike the Reel Wheel case’s open-ended format that requires students to critically evaluate available data and

develop their own analytic models, Shoe Zoo, Inc. provides a detailed spreadsheet that guides students through a specific

approach to develop their estimate and to draw conclusions. Shoe Zoo, Inc. does not require students to research applicable

auditing standards, does not vary the level of data aggregation used in developing the estimate, and does not present thought

questions that overlap with those presented to students in the Reel Wheel case.

Learning Objectives

Upon completion of the Reel Wheel case, students will be able to: (1) explain the benefits and challenges of using

substantive analytical procedures, (2) research relevant auditing standards, (3) create and analyze relevant substantive analytical

procedures, (4) evaluate the appropriateness of the level of data aggregation in substantive analytical procedures, and (5)

discuss factors that affect the level of reliability of various data used by the auditor.

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In Part 1 of the case, students are directed to study the PCAOB auditing standards relating to the use of substantive

analytical procedures. This requirement is designed to help the students identify authoritative guidance and to articulate

responses related to a series of questions.

As students complete Part 1, they will develop a better understanding of the principles and professional auditing standards

governing the use of substantive analytical procedures (Learning Objective 2). They will also gain an appreciation for the

relative benefits and challenges of employing analytical procedures as part of the substantive testing process in an audit

engagement (Learning Objective 1). Although students are routinely exposed to textbook descriptions and PowerPoint slides

about auditing concepts, many are unfamiliar with actual auditing standards. By directing students to read excerpts of

prescriptive auditing standards, the case helps students become familiar with the process of consulting authoritative guidance

when planning and performing an audit.

Part 2 of the case focuses primarily on Learning Objectives 3 and 4 by helping students gain a deeper understanding of

substantive analytical procedures by working in Excel to create their own analytics. A common concern many students

express—particularly in undergraduate accounting courses—is that they aren’t exposed to enough hands-on experiences.

Requiring students to use Excel to develop and document their own analytics engages their critical thinking skills and helps

them to apply—in practice—the principles and concepts taught in auditing textbooks and professional standards. By requiring

students to develop a series of three increasingly precise analytics, the case makes salient the importance and value of

developing analytics that integrate reliable, disaggregated data.

Part 3 of the case asks students to reflect on the adequacy of the precision of the estimates they developed and to consider

how they might corroborate the evidence obtained from the analytic using other audit procedures (Learning Objectives 1, 3, and

4). In addition, students are required to research the role of SOC 1 reports and to consider how the use of a third-party service

provider might affect the audit methodology relating to the Ticket Sales Revenue account (Learning Objective 5).

Evidence of Classroom Validation

In order to evaluate the effectiveness of the Reel Wheel case in achieving the intended learning objectives, we surveyed

144 students from five sections of undergraduate accounting classes taught at two different universities.
1

The survey contained

both open-ended requests for feedback and a series of statements that students could agree or disagree with on a 9-point Likert

scale (1¼‘‘Strongly Agree,’’ 5¼‘‘Neither Agree nor Disagree,’’ and 9¼ ‘‘Strongly Disagree’’). Several of the statements related
directly to individual learning objectives.

2

With respect to the first learning objective, students indicated that—after completing the Reel Wheel case—they ‘‘have a
better understanding of the role of substantive analytical procedures in a financial statement audit’’ (Mean ¼ 2.11, t141 ¼
�26.143, p-value , 0.001) and that they ‘‘understand the costs and benefits of using substantive analytical procedures as a
substantive test’’ during an audit engagement (Mean¼2.48, t141¼�21.733, p-value , 0.001). Students’ responses also suggest
that the second learning objective was met; students largely agreed that, after completing the Reel Wheel case, they ‘‘have a
better understanding of auditing standards related to substantive analytical procedures’’ (Mean¼2.44, t140 ¼�21.782, p-value
, 0.001). Regarding the third learning objective, students indicated that ‘‘[they] feel confident in [their] ability to perform
substantive analytical procedures’’ after completing the case (Mean ¼ 3.15, t141 ¼�13.272, p-value , 0.001). Finally,
consistent with the fourth and fifth learning objectives, students overwhelmingly indicated that they ‘‘understand the value of
using reliable disaggregated data to enhance the precision of an independent estimate’’ (Mean ¼ 1.90, t141 ¼�24.335, p-value
, 0.001).

3

In addition to gathering objective data designed to test whether the learning objectives were met, we also provided open-

ended opportunities for students to leave feedback regarding their experiences with the case. As additional evidence to support

the effectiveness of the case in achieving the stated objectives, students’ responses included the following anecdotes:

1
Seventy-one students completed the case as an out-of-class assignment, while 73 students completed a hybrid approach where one or more parts were
completed in the classroom. Part 3, which was added to the case in response to reviewers’ suggestions, was only viewed by 89 of the student
respondents.

2
Each of the authors obtained Institutional Review Board (IRB) approval at his respective institution prior to surveying the students. Participation in the
survey was voluntary and anonymous. Students who participated were offered the chance to win one of several $25 gift cards, which were each awarded
following a random drawing of e-mail addresses provided after completing the feedback survey. (In order to maintain anonymity, students were
informed that their e-mail addresses were not stored or associated with their other survey responses.)

3
Each of the reported t-statistics represents a test comparing the mean student response to the mid-point of the Likert scale (i.e., Neither Agree nor
Disagree). Reported p-values are two-sided. There are no statistically-significant differences in mean responses between the two universities for
variables reported in Table 1 (i.e., all p-values . 0.10).

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� ‘‘The Reel Wheel case is probably my favorite case that we have worked on this semester. . .It was also great practice
coming up with our own ways of analyzing the data. Additionally, I thought it was extremely relevant in what we

learned in class and demonstrated how important it is to be able to think critically.’’
� ‘‘I did gain a lot of appreciation for substantive analytical procedures after seeing the results between the aggregated and

disaggregated data. Also, I think this case offered the right amount of challenge without being unworkable.’’
� ‘‘I liked that the Reel Wheel case gave a realistic look at how substantive audit procedures work. There wasn’t only one

way to complete the case and I think that accurately reflects the somewhat subjective nature of auditing and how an

auditor’s judgments can influence the way an actual audit is conducted.’’
� ‘‘I liked the freedom to try it my own way. There were multiple ways to attempt to get an average price, and then as we

got more information, see how that changed our view of the situation.’’

Student Feedback

In addition to surveying students to determine whether the learning objectives were met, we asked students whether they

agreed that the Reel Wheel case was a useful learning exercise, was interesting, and was fun to work on. We also asked them

whether they would recommend that other auditing students complete a case like the Reel Wheel case and whether they felt like

this case provided a real-world context for applying classroom principles.

Students responded using a 9-point Likert scale ranging from 1 (Strongly Agree) to 9 (Strongly Disagree), with a mid-point

of 5 (Neither Agree nor Disagree). Regardless of the approach used for implementing the case, students felt like the case was a

useful learning exercise (Mean¼1.83, t141¼�29.317, p-value , 0.001), was interesting (Mean¼2.04, t141¼�23.628, p-value
, 0.001), and was fun to work on (Mean ¼ 2.65, t141 ¼�16.118, p-value , 0.001). In addition, students overwhelmingly
recommended that other auditing students complete a similar case (Mean ¼ 1.87, t140 ¼�28.149, p-value , 0.001), and they
felt like the Reel Wheel case provided a real-world context for applying classroom principles (Mean¼1.65, t140¼�33.472, p-
value , 0.001).

4

Again, we invited students to provide feedback in open text responses, and some of their quotes provide additional

evidence regarding these characteristics of the case:

TABLE 1

Student Feedback: Learning Objectivesa

Learning
Objective Mean Median Min Max

Std.
Dev. t-statb p-value

After completing the Reel Wheel case, I have a better

understanding of the role of substantive analytical

procedures in a financial statement audit. (n ¼ 142)

1 2.11 2 1 9 1.319 �26.143 , 0.001

After completing the Reel Wheel case, I understand the

costs and benefits of using substantive analytical

procedures as a substantive test. (n ¼ 142)

1 2.48 2 1 8 1.382 �21.733 , 0.001

After completing the Reel Wheel case, I have a better

understanding of auditing standards related to

substantive analytical procedures. (n ¼ 141)

2 2.44 2 1 8 1.396 �21.782 , 0.001

After completing the Reel Wheel case, I feel confident in

my ability to perform substantive analytical procedures.

(n ¼ 142)

3 3.15 3 1 9 1.663 �13.272 , 0.001

After completing the Reel Wheel case, I understand the

value of using reliable disaggregated data to enhance

the precision of an independent estimate. (n ¼ 142)

4, 5 1.90 1 1 9 1.517 �24.335 , 0.001

a
The scale for these questions ranges from 1 (Strongly Agree) to 9 (Strongly Disagree), with a mid-point of 5 (Neither Agree nor Disagree).

b
Reported t-statistics represent a test of mean responses compared to the scale’s mid-point (Neither Agree nor Disagree). Reported p-values are two-tailed.

4
There were no statistically-significant differences in mean responses between students from the two universities for variables reported in Table 2 (all p-
values . 0.10).

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� ‘‘I sincerely felt like I was gaining real-world experience, and it was enjoyable. It wasn’t too complicated or too far from
reality. It made me feel like I could actually be an auditor!’’

� ‘‘I liked how it related to the real world and how I was able to apply the things that I have learned in class.’’
� ‘‘The best part of the Reel Wheel case was how it was based on something real. . . It felt like something more than just a

simple homework assignment, and that made it fun.’’

In an attempt to make improvements to the case and its implementation, we also asked students how instructors could

enhance the usefulness of the Reel Wheel case in their classrooms. We addressed several suggestions (e.g., make instructions

clearer, provide more guidance on specific requirements) through modest revisions to the case materials, but the following

comments represent constructive feedback for instructors to consider as they use the case:

� ‘‘A little more guidance in creating the spreadsheets for the [expectation formed using] disaggregated data would have
been helpful. . .’’

� ‘‘I ended up forgetting I could use the [Excel exhibits]. I entered all of the cells in manually, without realizing there is an
easier way.’’

� ‘‘It would be helpful to have time in class to work on the analysis; maybe the class could work together on the big screen
by having one person navigate Excel while others help describe what to do.’’

� ‘‘The [Part 1 and Part 3] memos seemed very lengthy when [they] could easily be discussed in class.’’

Implementation Guidance

The case is designed to allow instructors to tailor its implementation. The nature of the case lends itself well to either

individual work or to small-group assignments. We describe two possible approaches for implementing the Reel Wheel case in

an undergraduate auditing course.

Out-of-Class Assignment

One scenario for using the Reel Wheel case is to assign students (either individually or in pairs) to complete all parts (Parts

1, 2, and 3) outside of class with in-class follow up discussion of the case. This approach is the primary approach used by the

instructors who have implemented the case thus far. As previously discussed, Part 1 requires students to write a memo in which

they respond to five short-answer questions. Part 2 involves more critical thinking and creativity on the part of the students, and

the progressive nature of the three requirements allows students to develop confidence by creating a series of analytics that

increase in complexity and precision as the student becomes more experienced with the case. Part 3 also requires students to

think critically and to use judgment in crafting their responses to the four questions posed in this section. While responding to

TABLE 2

Student Feedback: Case Characteristicsa

Mean Median Min Max
Std.
Dev. t-statb p-value

I felt like the Reel Wheel case was a useful

learning exercise. (n ¼ 142)
1.83 1 1 9 1.288 �29.317 , 0.001

I felt like the Reel Wheel case was interesting.

(n ¼ 142)
2.04 2 1 9 1.492 �23.628 , 0.001

I felt like the Reel Wheel case was fun to work

on. (n ¼ 142)
2.65 2 1 9 1.739 �16.118 , 0.001

I would recommend that other auditing students

complete the Reel Wheel case to learn about

substantive analytical procedures. (n ¼ 141)

1.87 1 1 9 1.319 �28.149 , 0.001

I felt like the Reel Wheel case provided a real-

world context for applying classroom

principles. (n ¼ 141)

1.65 1 1 9 1.190 �33.472 , 0.001

a
The scale for these questions ranges from 1 (Strongly Agree) to 9 (Strongly Disagree), with a mid-point of 5 (Neither Agree nor Disagree).

b
Reported t-statistics represent a test of mean responses compared to the scale’s mid-point (Neither Agree nor Disagree). Reported p-values are two-tailed.

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the questions should not take a substantial amount of time, students will likely need some time to deeply consider some aspects

of these requirements.

In our experience, the amount of support needed by students with this out-of-class format is relatively modest. The most

common inquiries from students were to seek confirmation of identified auditing standards and to seek feedback on approaches

taken in developing their analytics. We recommend assigning a graduate assistant who has the suggested solution to serve as a

contact person to answer routine questions or to provide appropriate guidance and assistance to students as they work on the

case outside of class. We also recommend communicating that a variety of approaches exist to developing the Part 2 estimates

to reduce potential anxiety students may feel regarding whether their approach is the ‘‘right’’ one.

In order to better understand the amount of time required to complete the case outside of class, we asked students the

following question: ‘‘How much time do you think most students would need to complete [each part] of the Reel Wheel case?’’

Although students’ responses varied based on whether they had completed each part of the case in class or on their own, the

overall responses indicated that each part of the assignment could be completed in ‘‘between one and two hours.’’

After the students complete the assignment outside of class, we recommend spending 30 to 45 minutes reviewing the case

in a classroom lecture setting. This discussion could include a review of questions from Parts 1 and 3 as well as a demonstration

of possible solutions for the required analytics developed in Part 2.

Hybrid Out-of-Class and In-Class Assignment

An alternative method for using the Reel Wheel case in an auditing course is with an in-class, interactive case study

combined with an out-of-class portion. When using portions of this case as an in-class activity, we recommend encouraging

students to work in small groups to encourage intra-group discussion and to allow students to share the workload and to share

resources (e.g., laptops with internet access and Excel). At various points during the class, the instructor can invite groups to

share with the rest of the class. This requirement to share helps to hold groups accountable, which increases their attention and

engagement with the case study. This approach also helps ensure that groups that may be struggling to complete the case will

have an opportunity to get on track in a relatively short amount of time by seeing how other students are approaching the case.

FIGURE 1
Sample Itinerary for In-Class and Out-of-Class Hybrid Case Assignmenta

a
Depending on class size and student preparation, instructors may choose to adjust the times suggested in this sample itinerary. For example, instructors
could preserve more time for groups to work independently on Part 2.3 by leading a demonstration (i.e., working together as a class) of Part 2.1 and/or
2.2.

The Reel Wheel: Using Analytical Procedures as Substantive Tests of Account Balances 23

Issues in Accounting Education
Volume 35, Number 1, 2020

In a standard 75-minute class period, we recommend using a schedule that allows groups to perform tasks and to regularly

report back and discuss results with the other class members. In order to provide adequate time to complete the case in class, the

instructor might choose to provide significant guidance to students on portions of the case study if students appear to be getting

behind schedule. While a variety of approaches could be used, we provide a sample itinerary for completing the case as an in-

class and out-of-class hybrid activity in Figure 1.

Teaching Notes to this case include an Excel file provided to students with necessary data, suggested solutions to Parts 1,

2, and 3, and a set of instructor PowerPoint slides to facilitate in-class discussion of the case.

TEACHING NOTES AND STUDENT VERSION OF THE CASE

Teaching Notes and the Student Version of the Case are available only to non-student-member subscribers to Issues in
Accounting Education through the American Accounting Association’s electronic publications system at http://aaapubs.org/.
Non-student-member subscribers should use their usernames and passwords for entry into the system where the Teaching Notes

can be reviewed and printed. The ‘‘Student Version of the Case’’ is available as a supplemental file that is posted with the
Teaching Notes. Please do not make the Teaching Notes available to students or post them on websites.

If you are a non-student-member of AAA with a subscription to Issues in Accounting Education and have any trouble
accessing this material, please contact the AAA headquarters office at [email protected] or (941) 921-7747.

REFERENCES

Bagley, P., and N. Harp. 2012. Shoe Zoo, Inc.: A practice in electronic work papers, tick mark preparation, and client communication

through the audit of property, plant, and equipment. Issues in Accounting Education 27 (4): 1131–1151. https://doi.org/10.2308/
iace-50251

Beasley, M., F. Buckless, S. Glover, and D. Prawitt. 2015. Auditing Cases: An Interactive Learning Approach. 6th edition. New York,
NY: Pearson Education, Inc.

D’Aquila, J. M., and K. Capriotti. 2011. The SEC’s case against California micro devices: A lesson in using professional skepticism and

obtaining sufficient appropriate evidence. Issues in Accounting Education 26 (1): 145–154. https://doi.org/10.2308/iace.2011.26.1.
145

24 Smith and Stephens

Issues in Accounting Education
Volume 35, Number 1, 2020

The Reel Wheel

Using Analytical Procedures as Substantive Tests of Account Balances

RW Ticket Revenue A.01

	Coliseum Entertainment							Workpaper (WP) ID:	A.01
	Substantive Analytical Procedure – Ticket Sales Revenue: The Reel Wheel							Date:
	Year-end Audit: December 31, 20X5							Prepared By:
	20X5 Unaudited Account Balance (Ticket Sales Revenue)
	Account				Data Point	Unit Label	Tickmark	WP Reference
	Ticket Sales Revenue (unaudited)				$ 73,468,219.00	dollars	PBC	from Trial Balance
	Allocated tolerable difference (i.e., tolerable error)				675,000.00	dollars		AA.09
	20X5 Summary Information & Data for “The Reel Wheel”
	Description				Data Point	Unit Label	Tickmark	WP Reference
	Observation Wheel Height				550	feet	PBC, RW
	Number of Passenger Cars				28	cars	PBC, RW
	Interior Space per Car				225	square feet	PBC, RW
	Maximum Capacity per Car				40	passengers	PBC, RW
	Time Required for Car Revolution				30	minutes	PBC, RW
	Hours of Operation (Open)				11:00am	.	PBC, RW
	Hours of Operation (Close)				2:00am	.	PBC, RW
	Description (20X5 calendar year)				Data Point	Unit Label	Tickmark	WP Reference
	Days in Operation				361	days	PBC
	Total Passengers				3,058,452	passengers	PBC	from A.02
	Total Children Passengers				250,389	passengers	PBC	A.02, A.03
	Description (20X5 calendar year)				Data Point	Unit Label	Tickmark	WP Reference
	Regular Ticket Price (Child; Age 0 – 12)				$ – 0	dollars	RW
	Regular Ticket Price – Day (Adult; Age 13+)				24.95	dollars	RW
	Regular Ticket Price – Night (Adult; Age 13+)				34.95	dollars	RW
	Summer Ticket Price – Day (Adult; Age 13+)				19.95	dollars	RW
	Summer Ticket Price – Night (Adult; Age 13+)				29.95	dollars	RW
	WholesaleTicket Price				12.95	dollars	PBC
	Notes
	• Where noted, data is verified at multiple sources (e.g., PBC, RW).
	• The Reel Wheel sells some tickets to wholesalers – such as third-party travel websites – if booked as part of a travel package that includes a stay at a Coliseum hotel.
	• Although not specifically listed on the RW website, prices for Las Vegas locals (Photo ID required) are 40% off of Regular Adult (Day, Night) prices. No additional summer discount apply for locals.
	Tickmark Legend
	PBC	Provided by client (Coliseum Entertainment)
	RW	Sourced from Reel Wheel public website

RW Ticket Revenue A.02

	Coliseum Entertainment					Workpaper (WP) ID:	A.02
	Substantive Analytical Procedure – Ticket Sales Revenue: The Reel Wheel					Date:
	Year-end Audit: December 31, 20X5					Prepared By:
	20X5 Ticket Sales Data for “The Reel Wheel”				[Provided by Client]
		Total Passengers	Unit Label	Tickmark	WP Reference
	January	245,163	people	PBC
	February	228,455	people
	March	261,996	people
	Q1 20X5	735,614	people
	April	255,898	people
	May	270,268	people
	June	256,758	people
	Q2 20X5	782,924	people
	July	270,000	people
	August	260,209	people
	September	256,207	people
	Q3 20X5	786,416	people
	October	273,523	people
	November	246,589	people
	December	233,385	people
	Q4 20X5	753,497	people
	20X5 Total	3,058,451	people	PBC	to A.01
	Tickmark Legend
	PBC	Provided by client (Coliseum Entertainment)

RW Ticket Revenue A.03

				Colisum Entertainment				Workpaper (WP) ID:		A.03
				Substantive Analytical Procedure – Ticket Sales Revenue: The Reel Wheel				Date:
				Year-end Audit: December 31, 20X5				Prepared By:
	20X5 Ticket Sales Mix (%) for “The Reel Wheel”						[Provided by Client]				Tickmark
											PBC
		Children (0 – 12)		Adults (13+)		Locals		Wholesale
		Day	Night	Day	Night	Day	Night	Day	Night
	January	4.2%	3.3%	22.4%	43.8%	4.5%	8.7%	5.2%	7.9%
	February	4.7%	3.1%	22.8%	41.6%	4.9%	9.4%	5.0%	8.5%
	March	4.1%	3.3%	23.1%	43.6%	4.0%	7.8%	5.8%	8.3%
	Q1	4.3%	3.2%	22.8%	43.0%	4.5%	8.6%	5.3%	8.2%	100.0%
	April	4.3%	3.8%	23.9%	41.2%	4.7%	9.0%	5.1%	8.0%
	May	4.6%	3.0%	24.1%	44.2%	4.3%	8.9%	4.2%	6.7%
	June	4.9%	4.3%	23.6%	44.7%	4.6%	9.3%	3.7%	4.9%
	Q2	4.6%	3.7%	23.9%	43.4%	4.5%	9.1%	4.3%	6.5%	100.0%
	July	4.9%	4.0%	22.2%	41.2%	5.2%	10.4%	4.9%	7.2%
	August	4.9%	4.1%	21.6%	43.3%	4.8%	11.0%	4.4%	5.9%
	September	4.1%	3.4%	22.9%	42.6%	4.6%	10.4%	5.3%	6.7%
	Q3	4.6%	3.8%	22.2%	42.4%	4.9%	10.6%	4.9%	6.6%	100.0%
	October	4.5%	3.7%	23.1%	43.2%	4.1%	9.7%	4.9%	6.8%
	November	4.5%	4.1%	23.7%	42.9%	4.0%	8.8%	5.0%	7.0%
	December	4.3%	4.1%	23.0%	42.5%	4.2%	8.4%	5.4%	8.1%
	Q4	4.4%	4.0%	23.3%	42.9%	4.1%	9.0%	5.1%	7.3%	100.0%	PBC
	Tickmark Legend
	PBC	Provided by client (Coliseum Entertainment)