Auditing And Assurance Services
17th Edition
ISBN: 9780134897431
Author: ARENS, Alvin A.
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 7, Problem 36DQP
a.
To determine
Explain the conclusion that is shown from the given information about the company’s future.
b.
To determine
List the additional information that is helpful in assessment of C Company’s financial condition.
c.
To determine
Comment on the aspects of the company that should receive special emphasis in the audit based on the preceding ratios.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Stan is auditing First Financial Services and would like to use financial ratios to test the ability of First Financial Services to meet its current obligations. Identify two ratios that would help Stan in this task. Indicate how each ratio is calculated and what a high ratio would signify to Stan.
Ratio Analysis is the process of identifying the financial strengths and weaknesses of the enterprise by logically establishing relationship between the items of Balance Sheet or Income Statement or both and interpreting the results there of in order to derive meaningful conclusions.
In view of the requirement of various users (e.g., Short-term Creditors, Long-term Creditors, Management & Investors) of the ratios, one may classify ratios into the following four groups:
a) Liquidity Ratios
b) Solvency Ratios
c) Activity Ratios
d) Profitability Ratios
You are required to pick any two from the aforementioned groups and discuss the various ratios calculated under these along with the purpose or objective of calculation of the individual ratios you are alluding to.
Can investors be confident that if the financial statements of different companiesare accurate and are prepared in accordance with GAAP, the data reported by onecompany will be comparable to the data provided by another?
Chapter 7 Solutions
Auditing And Assurance Services
Ch. 7 - Prob. 1RQCh. 7 - Prob. 2RQCh. 7 - Prob. 3RQCh. 7 - Prob. 4RQCh. 7 - Prob. 5RQCh. 7 - Prob. 6RQCh. 7 - Prob. 7RQCh. 7 - Prob. 8RQCh. 7 - Prob. 9RQCh. 7 - Prob. 10RQ
Ch. 7 - Prob. 11RQCh. 7 - Prob. 12RQCh. 7 - Prob. 13RQCh. 7 - Prob. 14RQCh. 7 - Prob. 15RQCh. 7 - Prob. 16RQCh. 7 - Prob. 17RQCh. 7 - Prob. 18RQCh. 7 - Prob. 19RQCh. 7 - Prob. 20RQCh. 7 - Define what is meant by a tick mark. What is its...Ch. 7 - Prob. 22RQCh. 7 - Prob. 23.1MCQCh. 7 - Prob. 23.2MCQCh. 7 - Prob. 23.3MCQCh. 7 - Prob. 24.1MCQCh. 7 - Prob. 24.2MCQCh. 7 - Prob. 24.3MCQCh. 7 - Prob. 25.1MCQCh. 7 - Prob. 25.2MCQCh. 7 - Prob. 25.3MCQCh. 7 - Prob. 26.1MCQCh. 7 - Prob. 26.2MCQCh. 7 - Prob. 26.3MCQCh. 7 - Prob. 27DQPCh. 7 - Prob. 28DQPCh. 7 - Prob. 29DQPCh. 7 - Prob. 30DQPCh. 7 - Prob. 31DQPCh. 7 - Prob. 32DQPCh. 7 - Prob. 33DQPCh. 7 - Prob. 34DQPCh. 7 - Prob. 36DQPCh. 7 - Prob. 37DQPCh. 7 - Prob. 40DQP
Knowledge Booster
Similar questions
- Indicate how the auditor could use substantive analytical procedures in resting the following accounts: a. Interest expense related to bonds outstanding. b. Natural gas expense for a public utility company. c. Supplies expense for a factory. d. Cost of goods sold for a fast-food franchisor (e.g., Wendy’s or McDonald’s). Note that cost of goods sold tends to average about 35% of sales in fast-food franchises. e. Salary expense for an office (region) of a professional services firm.arrow_forwardA company can use comparisons of its financial data to the data of other companies and industry averages to evaluate its position. Group of answer choices True Falsearrow_forwardWhat are the benefits of comparing a firm’s current financial information withinformation for previous accounting periods, with industry averages, and withfinancial information for competitors?arrow_forward
- Simplified approaches for preparing pro forma statements assume that the firm’s past financial condition is an accurate indicator of the future. There are several examples from the past where organizations were not accurately reporting their financial information. Discuss the relationship between the external auditor and the organization. What steps have been taken to ensure that the relationship is truly neutral and no bias is shown by the external auditing firm?arrow_forwardPlease include relevant parts and be thorough with explanation. If you were a user of financial statements, what type of ratio/analysis do you think would be most important to use to make sure the company you have invested in is doing well? What would you look for in a company that you were considering investing in?arrow_forwardFill in the blanks below with the accounting principle, assumption, or related item that best completes the sentence. ________________________ and _______________________ are the two fundamental qualities that make accounting information useful for decision making. Information that helps users confirm or correct prior expectations has _________________ ___________________. ________________________ enables users to identify the real similarities and differences in economic events between companies. _________________ is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Information is _______________________ if omitting it or misstating it could influence decisions that users make on the basis of the reported financial information. The ________________________ characteristic requires that the same accounting method be used from one accounting…arrow_forward
- Which of the following is the least independent piece of information to collect about a company that is a potential M&A target? A. Internal audits B. Fun and Bradstreet reports C. Audited financial statements D. Relevant macroeconomics outlooks from an independent research organizationarrow_forwardHow you can assess the company’s performance with financial ratios? Select any company and analyzes the current situation of financial statements with the help of rations.arrow_forwardThe following factors describe a potential audit client. For each factor, indicate whether it is indicative of poor corporate governance. Explain the reasoning for your assessment. Finally, determine the risks to reliable financial reporting that are associated with each factor. a.The company is in the financial services sector and has a large number of consumer loans, including mortgages, outstanding. b.The CEO’s and CFO’s compensation is based on three components: (a) base salary, (b) bonus based on growth in assets and profits, and (c) significant stock options. c.The company has an internal auditor who reports directly to the CFO and makes an annual report to the audit committee.arrow_forward
- In regards to benchmarking, which of the following statements is incorrect? A. Benchmarking is the practice of comparing a company with other leading companies. B. The two main types of benchmarks in financial statement analysis include benchmarking against the industry average and benchmarking against a key competitor. C.The industry average is not a useful benchmark for evaluating a company. D. Providing commonminus−size percentages in a graphical manner highlights differencesarrow_forwardAs the financial analysts of Mezza Holding Company you are required to write a Memo to the Financial Manager describing the performance of the company and your suggestions on future improvements based on the following financial statements. . State the purpose of your Memo. Describe and interpret ratio results and provide company’s performance analysis based on them. Describe the weaknesses and strength of the company’s financial data. Provide suggestions on how to improve company’s performance.arrow_forward. Explain the factors used in the formula, how the ratio assists the investor in evaluating a company’s performance, and whether it assesses liquidity, solvency, or profitability.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Auditing: A Risk Based-Approach to Conducting a Q...AccountingISBN:9781305080577Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:South-Western College Pub
Auditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage Learning
Auditing: A Risk Based-Approach to Conducting a Q...
Accounting
ISBN:9781305080577
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:South-Western College Pub
Auditing: A Risk Based-Approach (MindTap Course L...
Accounting
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Cengage Learning