Connect Access Card for Principles of Auditing & Other Assurance Services
21st Edition
ISBN: 9781260299366
Author: Ray Whittington, Kurt Pany
Publisher: McGraw-Hill Education
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Question
Chapter 5, Problem 53P
a.
To determine
Identify the accounts that may appear to represent significant variations from what one might expect.
b.
To determine
Identify the ratios that may appear to represent significant variations from what one might expect.
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REFER TO IMAGE FOR NUMBERS
Marilyn Terrill is the senior auditor for the audit of Uden Supply Company for the year ended December 31, 20X4. In planning the audit, Marilyn is attempting to develop expectations for planning analytical procedures based on the financial information for prior years and her knowledge of the business and the industry, including these:
Based on economic conditions, she believes that the increase in sales for the current year should approximate the historical trend in terms of actual dollar increases.
Based on her knowledge of industry trends, she believes that the gross profit percentage for 20X4 should be about 2 percent less than the percentage for 20X3.
Based on her knowledge of regulations, she is aware that the effective tax rate for the company for 20X4 has been reduced by 5 percent from that in 20X3.
Based on her knowledge of economic conditions, she is aware that the effective interest rate on the company’s line of credit for 20X4 was…
5
Please provide the type of audit procedures that was performed in the following actions or procedures:
Read the minutes of a board of directors’ meeting to summarize the information relevant to the financial statements __________________
Trace postings from the sales reports to the general ledger accounts, and back from the general ledger listing to the sales reports to determine sales have been recorded _____________
Calculate debt-equity ratio for each quarter and compare to previous year or the industry ratio __________________________
Prepare a written request to sample of suppliers or vendors to confirm the accuracy of the amount owed to them by the client that is being audited ____________________
a. Compute the following ratios for Crazy Eddie during the period 1984-1987. See balance sheet and income statement. (Show working)
Gross profit ratio Inventory Turnover Day’s sales in inventory Accounts receivable turnover Day’s sales in accounts receivable Accounts Payable Turnover Ratio Long-Term Debt to Assets Ratio
b. Identify and briefly explain the red flags in Crazy Eddie's financial statements which suggested that the firm posed a higher-than-normal level of audit risk.
Chapter 5 Solutions
Connect Access Card for Principles of Auditing & Other Assurance Services
Ch. 5 - Prob. 1RQCh. 5 - Prob. 2RQCh. 5 - Prob. 3RQCh. 5 - Distinguish among routine, nonroutine, and...Ch. 5 - Prob. 5RQCh. 5 - Prob. 6RQCh. 5 - Prob. 7RQCh. 5 - As part of the verification of accounts receivable...Ch. 5 - Prob. 9RQCh. 5 - When in the course of an audit might the auditors...
Ch. 5 - Prob. 11RQCh. 5 - Prob. 12RQCh. 5 - Prob. 13RQCh. 5 - Prob. 14RQCh. 5 - Prob. 15RQCh. 5 - Prob. 16RQCh. 5 - Prob. 17RQCh. 5 - Prob. 18RQCh. 5 - Prob. 19RQCh. 5 - What disclosures should be made in the financial...Ch. 5 - Prob. 21RQCh. 5 - Prob. 22RQCh. 5 - Prob. 23RQCh. 5 - Prob. 24RQCh. 5 - Prob. 25RQCh. 5 - Prob. 26RQCh. 5 - Prob. 27RQCh. 5 - Prob. 28RQCh. 5 - Prob. 29RQCh. 5 - Prob. 30RQCh. 5 - Prob. 31RQCh. 5 - I have finished my testing of footings of the cash...Ch. 5 - Prob. 33RQCh. 5 - Prob. 34RQCh. 5 - Financial statements contain a number of...Ch. 5 - Prob. 36QRACh. 5 - In an audit of financial statements, the auditors...Ch. 5 - Prob. 38QRACh. 5 - Prob. 39QRACh. 5 - Prob. 40QRACh. 5 - Prob. 41QRACh. 5 - Prob. 42QRACh. 5 - Prob. 43QRACh. 5 - Prob. 44QRACh. 5 - Prob. 45AOQCh. 5 - Prob. 45BOQCh. 5 - Prob. 45COQCh. 5 - Prob. 45DOQCh. 5 - Prob. 45EOQCh. 5 - Prob. 45FOQCh. 5 - Prob. 45GOQCh. 5 - Prob. 45HOQCh. 5 - Prob. 45IOQCh. 5 - Prob. 45JOQCh. 5 - Prob. 45KOQCh. 5 - A difference of opinion concerning accounting and...Ch. 5 - Prob. 46OQCh. 5 - Prob. 47OQCh. 5 - Prob. 48AOQCh. 5 - Prob. 48BOQCh. 5 - Prob. 48COQCh. 5 - The cost of analytical procedures in terms of time...Ch. 5 - Prob. 48EOQCh. 5 - Prob. 49OQCh. 5 - Prob. 50PCh. 5 - Prob. 51PCh. 5 - Prob. 52PCh. 5 - Prob. 53PCh. 5 - Prob. 54PCh. 5 - Prob. 55PCh. 5 - Prob. 56P
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