Accounting ratios and percentagesEarnings per sharePerformance ratios include the following:Gross margin ((Gross profit/revenue)0.541.25??Expenses as a percentage of revenue:??Distribution costsAdministrative expensesSelling expensesOperating profit as a percentage of revenue?22 aa???222 a?Part ARequired1. using the information above, complete the calculation of accounting ratios andpercentages and comment briefly on the performance of the company for the twoyears.2. By reference to requirement 1, identify the areas that are subject to increased auditrisk and describe the further audit work you would perform in response to those risks. Carinal Ltd. specializes in the development of electronic components within quite acompetitive environment causing concerns for marketing and pricing. Its non-current assetsprimarily include IT software, property, and investments, and there have been additions tothese during the year.As audit manager, you are conducting a preliminary analytical review and associated riskanalysis for this client for the year ended June 30 2022. You have been presented with thefollowing draft financial information about Carinal with incomplete ratios and percentagescalculation.INCOME STATEMENTYear ended June 3020222021$'000$'000RevenueCost of sales224501867584758055Gross Profit1397510620Distribution costs42453120Administrative expenses12762134Selling expenses5555512Profit from operations28994854Net interest receivable1245495Profit before tax41445349Income tax expense21452345Net profit19993004Retained profits13252105Dividends paid$1250$1049

Accounting ratios compare the financial data of two or more periods. They are used to analyze the…

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 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.

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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Question

100%

Accounting ratios and percentages
Earnings per share
Performance ratios include the following:
Gross margin ((Gross profit/revenue)
0.54
1.25
?
?
Expenses as a percentage of revenue:
?
?
Distribution costs
Administrative expenses
Selling expenses
Operating profit as a percentage of revenue
?
22 aa
?
?
?
222 a
?
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.

Carinal Ltd. 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 2022. You have been presented with the
following draft financial information about Carinal with incomplete ratios and percentages
calculation.
INCOME STATEMENT
Year ended June 30
2022
2021
$'000
$'000
Revenue
Cost of sales
22450
18675
8475
8055
Gross Profit
13975
10620
Distribution costs
4245
3120
Administrative expenses
1276
2134
Selling expenses
5555
512
Profit from operations
2899
4854
Net interest receivable
1245
495
Profit before tax
4144
5349
Income tax expense
2145
2345
Net profit
1999
3004
Retained profits
1325
2105
Dividends paid
$1250
$1049

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