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1. Using the information above, complete the calculation of accounting ratios and percentages and comment briefly on the performance of the company for the two years.  2. By reference to requirement 1, identify the areas that are subject to increased audit risk and describe the further audit work you would perform in response to those risks.

1. Using the information above, complete the calculation of accounting ratios and percentages and comment briefly on the performance of the company for the two years.  2. By reference to requirement 1, identify the areas that are subject to increased audit risk and describe the further audit work you would perform in response to those risks.

Auditing: A Risk Based-Approach (MindTap Course List)
Auditing: A Risk Based-Approach (MindTap Course List)
11th Edition
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Chapter7: Planning The Audit: Identifying, Assessing, And Responding To The Risk Of Material Misstatement
Section: Chapter Questions
Problem 19RQSC
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1. Using the information above, complete the calculation of accounting ratios and
percentages and comment briefly on the performance of the company for the two
years. 
2. By reference to requirement 1, identify the areas that are subject to increased audit
risk and describe the further audit work you would perform in response to those risks.

Analita specializes in the development of electronic components within quite a competitive environment causing concerns for marketing and pricing. Its non-current assets primarily include IT software, property, and investments, and there have been additions to these during the year. As audit manager, you are conducting a preliminary analytical review and associated risk analysis for this client for the year ended June 30 2019. You have been presented with the following draft financial information about Analita with incomplete ratios and percentages calculation. Revenue Cost of sales Gross Profit Distribution costs Administrative expenses Selling expenses Profit from operations Net interest receivable Profit before tax Income tax expense Net profit Retained profits Dividends paid INCOME STATEMENT Year ended June 30 2019 2018 $'000 $'000 18,406 16,529 5,609 5,057 12,797 11,472 3,598 2,896 1164 1,998 4,442 474 6,104 495 6,599 1,852 4,747 3,777 $970,000 3,593 1245 4,838 2,209 2,629 1,327 $1,302,000
Transcribed Image Text:Analita specializes in the development of electronic components within quite a competitive environment causing concerns for marketing and pricing. Its non-current assets primarily include IT software, property, and investments, and there have been additions to these during the year. As audit manager, you are conducting a preliminary analytical review and associated risk analysis for this client for the year ended June 30 2019. You have been presented with the following draft financial information about Analita with incomplete ratios and percentages calculation. Revenue Cost of sales Gross Profit Distribution costs Administrative expenses Selling expenses Profit from operations Net interest receivable Profit before tax Income tax expense Net profit Retained profits Dividends paid INCOME STATEMENT Year ended June 30 2019 2018 $'000 $'000 18,406 16,529 5,609 5,057 12,797 11,472 3,598 2,896 1164 1,998 4,442 474 6,104 495 6,599 1,852 4,747 3,777 $970,000 3,593 1245 4,838 2,209 2,629 1,327 $1,302,000
Accounting ratios and percentages Earnings per share Performance ratios include the following: Gross margin ((Gross profit/revenue) Expenses as a percentage of revenue: Distribution costs Administrative expenses Selling expenses Operating profit as a percentage of revenue 0.54 ? ? ? ? ? 1.25 ? ? ? ? ? Part A Required 1. Using the information above, complete the calculation of accounting ratios and percentages and comment briefly on the performance of the company for the two years. 2. By reference to requirement 1, identify the areas that are subject to increased audit risk and describe the further audit work you would perform in response to those risks. Part B By reference to Part A: 1. What is the purpose of using analytical procedures on the client's performance measurement system? 2. What are some of the key factors that impact group interaction in an audit assignment?
Transcribed Image Text:Accounting ratios and percentages Earnings per share Performance ratios include the following: Gross margin ((Gross profit/revenue) Expenses as a percentage of revenue: Distribution costs Administrative expenses Selling expenses Operating profit as a percentage of revenue 0.54 ? ? ? ? ? 1.25 ? ? ? ? ? Part A Required 1. Using the information above, complete the calculation of accounting ratios and percentages and comment briefly on the performance of the company for the two years. 2. By reference to requirement 1, identify the areas that are subject to increased audit risk and describe the further audit work you would perform in response to those risks. Part B By reference to Part A: 1. What is the purpose of using analytical procedures on the client's performance measurement system? 2. What are some of the key factors that impact group interaction in an audit assignment?
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