SRT510 Business Case Studies

Auditing IT Investment Performance

NPV Analysis Estimates

Provide the following for a project:Costs (cash outflows)Benefits (cash inflows)Timing of outflows and inflows

Example

Intermec Inc (note—some numbers are fictitious)

Project PUltra secure wireless networkNPV $14.02M after 5 years at 15%; IRR 22%

How do you measure accuracy of estimates? Outflows (costs)

Balance sheet; cash flow statementTypically quarterly

Inflows (benefits)Balance sheet; income statementTypically quarterly

Example

Intermec Inc. (note—some numbers are fictitious)

Financial statementLarge differences in actual:expected!

Audit Plan

Take yearly projections and divide into quarters ($ are not necessarily equal—think of differences between businesses; think seasonality)

Add expected values As real numbers come in, calculate

difference

Adjustments

Part of your audit:How do you respond to differences between

expected and actual?What if expected targets are not being met?

When do you plan for audit?

Part of Project ManagementPlan your audit (closing phase?)

Who? How? – what fields? What variance?...