Leslie Fay Financial Ratios

In this situation, audit planning should have certain procedures to test the opportunities whether management can commit fraud, such as inquiries of management and employers to establish an overall understanding of the client’s strategies and business, industry and economic environment and competitors’ situations.

1. After reviewing the common size financial statements and the key ratios of Leslie Fay, there some of the financial statement item that should have been of particular interest to BDO Seidman:

Leslie Firtell has sucessfully made Tower Legal Solutions one of the fastest growing women-led companiesin the US today. Firtell is a well-known entrapreneur name in the legal staffing industry. She began her journey as an entrepreneur after successfully recieving her bacholors degree from the University of Rodchester and then continuing on to Benjamin N. Cardozo School of Law in 1996. As a typical recent graduate the loan due dates neared, and Firtell knew she had to start somewhere to recieve some income. She decided to take a temporary career starting job with a legal staffing firm. The company she began working for as well Firtell knew that this was a great fit. The small company awarded her and asked her to come on board as a recruiter.

This paper examines financial ratio analysis by defining, the three groups of stakeholders that use financial ratios, the five different kinds of ratios used and their applications, the analytical tools used in analysis, and finally financial ratio analysis limitations and benefits.

The chief executive of the company was closely working with the vendors whose confirmations were vital in the auditing work and hence they could have submitted false confirmations. The auditing firm established a national risk management program for its clients and so national reviews were done to identify the high risk items in the financial statement. The vendor allowances were particularly high but they were not documented. As such, the auditors were supposed to demand for the documentations and compare them with the real figures. It is however noted that most of the documentations received were non-standard and this could have led to a different audit report given that vendor allowances were earlier identified as a high risk area. Inventory management was found to be poor especially in the allowances for inventory reserves. The audit firm was therefore obliged to carry out a thorough evaluation of the inventory reserves and determine whether it was reasonable. The valuation was also supposed to include all classes of inventory but for the case of the company, the evaluation excluded instances where no sales had been made. Hence, this evaluation could not accurately represent the position of the inventory reserve in the company. (Waters,2003)

How can financial ratios extend your understanding of financial statements? What questions do the time series of ratios in case Exhibit 7 raise? What questions do the ratios on peer firms in case Exhibits 8 and 9 raise?

Analytical procedures can often point to areas that are out of sync with the prior results of the firm. Auditors should look closely at changes in the gross profit ratio and unusual changes in revenues or expenses. Once unusual results have been identified, auditors must search for reasonable explanations. If the explanations provided seem implausible then the auditor must expand the scope of testing and obtain additional corroborating evidence.

Before beginning an analysis of a company it is necessary to have a complete set of financial statements, preferably for the pas few years so that historical trends can be obtained. Ratios are a way for anyone to get an idea of the financial performance of a company by using the information contained in the financial statements. Ratios are grouped into four basic categories, liquidity, activity, profitability, and financial leverage. This document will use a variety of these ratios to analyze the firm, Sample Company, as of December 31,2000.

The financial data of company does not tell us the entire position of an organisation and its performance over the year or certain period of time for comparative purposes. Therefore, the use of ratios

Ratio analysis is the fundamental indicator of company’s performances for so many years; it is also can be seen as the very first step to measure a company’s performance along with its financial position. Moreover, ratio analysis has been researched and developed for many years, Bliss had presented the first coherent system of ratios, and he also stated that ratios are “indicator of the status of fundamental relationship within the business” Horrigan (1968). However there are some arguments on whether the ratio analysis is useful or not since to conduct these analyses will be costly to the company, also there are several limitations on how these ratios work. Therefore, the usefulness and the limitation of ratio analysis will be discussed further in this essay, with the use of easyJet’s annual report as examples.

With the help of financial statements that arise by the firm, analytical methods can be used to get information about the course of the business and the economic state. By calculating a small number of ratios it is possible to develop a clear picture of the position and performance of a firm (P.Atrill and E.Mclaney 2013). Financial ratios have two main users, management and inventors. Management uses financial ratios to analyse, control and determine the

Seeing that financial ratios depend on the financial data of companies which are influenced by their accounting practices and procedures, information can be distorted and render the comparison of ratios less useable. Also ratios indicate on overall result for a period (financial year) but do not explain how this was achieved in detail and what factors favorable or unfavorable contributed to its

Financial ratio is a combinations of ratios, that are formed from a variety of figures from financial statement using the technique ratio analysis. In order to assess the company’s performance. In this essay financial ratio would be split into six categories: profitability, activity, liquidity, gearing and market ratios. In order to discuss the usefulness and limitation on evaluating the performance of the company ,while using figures from EasyJet’s 2013 annual report.

In undertaking this research paper, which will be focusing on the concept of ratio analysis chapter 2 of the book will be used. The chapter focuses on issues to do with financial statement analysis as well as ratio analysis. Hence, the chapter will provide critical information about various concepts associated with ratio analysis, such as profitability ratio, liquidity ratios and other types of ratios.

This article initiates with the introduction on what is audit planning. It basically addresses the audit plan strategy of K & S Corporation limited’s Financial Statements. Being an external auditor of the company, key factors to be considered in auditing the financials of the subject company have been discussed in the article. The most significant accounts at risk being materially misstated have been critically examined citing the possible risks associated with such accounts. Last but not the least, the article concludes with recommendations with respect to audit assessment plan of the company. Hence, this article seeks to act as a ready reckoner guide for an audit manager in audit planning of K & S Corporation Limited.