a. To determine Recalculate the given ratios using excel. Explanation Analytical procedures: Analytical procedures are one of the Risk Assessment Procedures conducted by the auditors in order to attain the working and knowledge of the organization along with the environment. Ratios are used as the tool for comparison with the financial statements of the previous years as to whether the auditor’s expected results based on the prior years’ budgets and statistics set by the industry itself in which the entity is working. Current ratio : The current ratio is computed by dividing the current assets by the current liabilities. Days sales outstanding ratio: Days’ sales outstanding calculate the average collection period of the accounts receivables of the company. Debt to equity ratio: Debt to equity ratio is the ratio that tells how much debt a company uses to finance its total assets in relation to stockholders’ equity. This ratio is used to judge the financial leverage of the company. It is also known as the gearing ratio. Return on equity: Return on equity measures the profitability of the company by knowing how much profit a company generates from the amount invested by the stockholders’ in the company known as stockholders’ equity. Gross margin ratio: Gross margin ratio is the profitability ratio that compares the gross profit to the net sales. It tells how profitable a company sells its goods and services. Return on assets ratio: Return on assets tells how profitable a company is related to its total assets. It is calculated by dividing the net profit of the company to its total assets. Net fixed assets to equity ratio: It shows the contribution of the shareholder's fund in the net fixed assets of the company. It shows how much shareholder’s fund is used for investment in the fixed assets. Recalculation of the ratios using excel: Ratio Formulae Excel Calculation Current Ratio Current assets/current liabilities $11,845,852/$10,352,563 = 1... b. To determine Identify financial statements accounts that need to be investigated as the ratios recalculated cannot be compared to previous ratios, industry averages, or the knowledge of the company. c. To determine Identify the potential reasons for the unexpected accounts balance and related ratios for the accounts listed in part b.

Principles Of Auditing & Other Assurance Services

21st Edition

ISBN: 9781259916984

Author: WHITTINGTON, Ray, Pany, Kurt

Publisher: Mcgraw-hill Education,

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Chapter 6C, Problem 4P

To determine

Recalculate the given ratios using excel.

To determine

Identify financial statements accounts that need to be investigated as the ratios recalculated cannot be compared to previous ratios, industry averages, or the knowledge of the company.

To determine

Identify the potential reasons for the unexpected accounts balance and related ratios for the accounts listed in part b.

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Chapter 6C Solutions

Principles Of Auditing & Other Assurance Services

Ch. 6C - Prob. 1P Ch. 6C - Prob. 2P Ch. 6C - Prob. 3P Ch. 6C - The working paper for Keystone Computers &...

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