Accounting Ratios & PercentagesEarnings per SharePerformance Ratios including the following:Gross MarginExpenses as a percentage of revenue:0-431.040-800-78Distribution Costs0-200-15Administrative ExpensesSelling ExpensesOperating Profit0-070-130-200-020-340-48Required: -a) Using the information given in the question identify THREE high risk areas for the auditand explain why they are high risk areas.b) For each high risk area identified, describe one audit procedure you would perform inresponse to those risks. You have been presented with the following draft financial information about Efren Bata ReyesLtd, a very successful company that develops and licenses specialist computer software andhardware. Its non-current assets mainly consist of property, computer hardware and investments,and there have been additions to these during the year. The company is experiencing increasingcompetition from rival companies, most of which specialize in hardware or software, but not both.There is pressure to advertise and to cut prices. You are the audit manager. You are planning theaudit and are conducting a preliminary analytical review and associated risk analysis for this clientfor the year ended 31 July 2021. You have been provided with a summarized draft incomestatement which has been produced very quickly and certain accounting ratios and percentages.You have been informed that the company accounts for research and development costs inaccordance with IAS 38 Intangible Assets.INCOME STATEMENTYear ended 31 July, 2021S'000Year ended 31 July 2020S'000Revenue15,2063,00913,5243,007Cost of SalesGross Profit12,19710,517Distribution Costs3,0061,996Administrative ExpensesSelling expensesProfit from Operations9941,7683,0022745,1956,479Net Interest Revenue995395Profit Before Tax6,1906,874Income Tax Expense3,1041,452Net Profit3,0861,4695,422Dividends Paid1,439Retained Profits1,6173,983

Audit procedures are steps taken by auditors to obtain all relevant information about the accuracy…

Accounting Ratios & Percentages Earnings per Share Performance Ratios including the following: Gross Margin Expenses as a percentage of revenue: 0-43 1-04 0-80 0-78 Distribution Costs 0-20 0-15 0-13 Administrative Expenses Selling Expenses Operating Profit 0-07 0-20 0-02 0-34 0-48 Required: - a) Using the information given in the question identify THREE high risk areas for the audit and explain why they are high risk areas. b) For each high risk area identified, describe one audit procedure you would perform in response to those risks.

Accounting Ratios & Percentages Earnings per Share Performance Ratios including the following: Gross Margin Expenses as a percentage of revenue: 0-43 1-04 0-80 0-78 Distribution Costs 0-20 0-15 0-13 Administrative Expenses Selling Expenses Operating Profit 0-07 0-20 0-02 0-34 0-48 Required: - a) Using the information given in the question identify THREE high risk areas for the audit and explain why they are high risk areas. b) For each high risk area identified, describe one audit procedure you would perform in response to those risks.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Similar questions

Determine whether statement 1 and 2 are true or false 5. S1 -Objectives are the overall plans for the entity, while strategies are the operational approaches by which managements intends to achieve its objectives S2- Not all controls are relevant to the auditor’s risk assessment a. False, False b. True, False c. False, True d. True, True
question 3 (this is a auditing question) Which of the following services is appropriate for an independent examination of a cashflow forecast? Group of answer choices a) Both are appropriate. b) A review c) An external audit d) Neither service is appropriate
A portion of fees earned by a CPA but not due until completion of an audit is what type of adjustment A. Prepaid expense B. Unearned revenue C. Accrued asset D. Accrued liability
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FOR THE FOR THE FOLLOWING SPECIFIC TRANSACTION RELATED AUDIT OBJECTIVE IDENTIY THE APPROPRIATE MANAGEMENT ASSERTION FROM THE BELOW: SOME MAY BE USED MORE THAN ONCE OR NOT AT ALL(For reference see Power Point Table 6-3, 17 ed) 5 x 6 points =30 points MANGEMENT ASSERTION:1. OCCURENCE2. COJMPLETNESS3. ACCURACY4. CLASSIFICATION5. CUT OFF SPECIFIC TRANSACTION RELATED AUDIT OBJECTIVE 1. Recorded cash disbursements transactions are for the amount of goods and services received and are correctly recorded 2. Recorded cash disbursement transactions are for goods and services actually received. 3. Cash disbursement transactions are recorded on the correct dates 4. Existing cash disbursement transactions are recorded. 5. Cash disbursement transactions have been recorded in the proper accounts
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Numbers, 4,5,6,7,8,9,10 determining risks
6. Explain the benefits which an external financial statement audit provides for an auditee.
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Define Auditing and Explain in detail about the statement " Auditing starts where Accounting End" What is meant by this statement and In which situations we use this statement?