When analytical procedures disclose unexpected changes in financial relationships relative to prior years, the auditors consider the possible reasons for the changes. Give several possible reasons for the following significant changes in relationships:   a. The rate of inventory turnover (ratio of cost of goods sold to average inventory) has declined from the prior year’s rate.   b. The number of days’ sales in accounts receivable has increased over the prior year.

Q: a red flag of inventory theft: an increase in uncollectible sales an increase in bad debt expense an…

A: Inventory theft can have an indication through 1. Increase in uncollectible sales 2. Increase in bad…

Q: If a company was able to reduce its inventory level while keeping other things constant, we will see…

A: The ability of an individual, organization, or financial instrument to satisfy its short-term…

Q: o settle the outstanding amounts. a. Faithful Representation; completeness; Enhancing b. Faithful…

A: The information is useful when it is of high quality and it provide information that is needed to…

Q: The following situations represent errors and frauds that could occur in financial…

A:

Q: Changing the aging account receivable to a fixed rate at the end of the fiscal year looks good for…

A: Audit refers to the examination of the financial statements of an entity in order to express a…

Q: Drop in company's bad debt expense estimate indicates an improvement in collectability from…

A: The decrease in a company's bad debt expense estimate can be interpreted as a positive indicator. It…

Q: [17] Monetary-unit sampling (MUS) can be used to project the A. Monetary amount of error in a…

A: MUS (monetary-unit sampling) is a quantitative sampling approach for determining the amount of…

Q: The Allowance for Doubtful Accounts represents: a. The amount of uncollected accounts written off to…

A: The allowance for doubtful accounts is a contra-asset account that is associated with accounts…

Q: Which of the following is NOT a correct explanation for turnover ratios and periods calculated based…

A: Receivable turnover, Inventory Turnover and Payables turnover are three important turnover ratios…

Q: Which of the following would not be considered an analytical procedure?

A: The correct answer is: (A) Projecting an error rate by comparing the results of a statistical sample…

Q: Prior to the end of the fiscal year a company decides to increase its sales by loosening its credit…

A: Accounts receivable- It includes those persons to whom entity sold goods on credit basis. For…

Q: You have been presented with the following draft financial information about Efren Bata Reyes Ltd, a…

A: Audit risk is composed of two parts: material misstatement risk and detection risk. The risk of…

Q: When auditing merchandise inventory at year-end, the auditor performs audit procedures toensure that…

A: option B) Existence

Q: The auditor computed inventory turnover and compared it to prior years.  This substantive test…

A: Auditing inventory refers to cross-checking the physical inventory with the inventory reported in…

Q: : of a wholesale business that doe naintain perpetual inventory rds. Cravens has observed the

A: The correct answer is  a) Issue a disclaimer of opinion

Q: Auditors sometimes use comparisons of ratios as audit evidence. An unexplained decreasein the ratio…

A:

Q: When should the loss be reported in the interim income statement?

A: The inventory management will include ordering of goods, storing/holding of goods, work in progress…

Q: (Answer the following questions based on the Accounting for the Collapse of Dick Smith case. The…

A: Dick Smith Group (DSG) faced significant issues with its inventory management, which ultimately…

Q: risk over the cash disbursement function, the auditor notes a delay in recording disbursements. This…

A: when talking about control risk it is the risk that a material misstatement could occur this may be…

Q: a. Compute the following ratios for Crazy Eddie during the period 1984-1987. See balance sheet and…

A: Note: We’ll answer the first question since the exact one wasn’t specified. Please submit a new…

Q: Which of the following problems can be most ea client's year-end sales cutoff?

A: Sales revenue represents the revenue of the company by selling the products produced by the company.…

Q: A company that uses the periodic inventory system makes the following errors:…

A: Periodic inventory system refers to a method of inventory valuation in which physical count of…

Q: True or False Prior years' financial statements are not restated when the prospective approach is…

A: “Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: A list of errors is shown below: Show the effects of the errors on the indicated balance sheet and…

A: solution The answer is presented in the table below

Q: Specific balance-related audit objective Accounts receivable are appropriately aggregated and…

A: The importance of assertions in auditing cannot be overstated. In the auditing process, assertions…

Q: When auditing merchandise inventory at year-end, the auditor performs audit proceduresto obtain…

A: Given information is: When auditing merchandise inventory at year-end, the auditor performs audit…

Q: A small business in which credit sales fluctuate greatly from year to year uses the direct write-off…

A:

Q: Barber Technologies designs and develops software to be used for the management of inventory by both…

A: Barber Technologies designs and develops software to be used for the management of inventory by both…

Q: The gross profit technique implies that A. The value of the inventory has not grown from prior…

A: The amount of ending inventory for a reporting period is estimated using the gross profit technique.…

Q: The company financial documents I am working from include consolidated balance sheets, consolidated…

A: Inventory is the merchandise or products that are held either in the form of raw materials used in…

Q: 2. Gabriela Company’s auditor discovered that the company inadvertently overstated ending Inventory…

A: Inventory means the goods in which the business deals. Inventory should be valued correctly  as it…

Q: Which of the following factors could contribute to mistreatments in the revenue cycle? (select all…

A: Revenue Cycle: The revenue cycle is a method for defining and maintaining the processes used for the…

Q: List and explain the substaintive tests of Cash & Inventory

A: A substantive test is the audit procedure used by the auditors of the business in order to check the…

Q: List and explain the substantive tets of Cash and Inventory.

A: Substantive tests It is the procedures by which evidence is gathered by auditors. It is inclusive of…

Q: In your audit of ABC Co., you noted that the company's balance sheet shows the accounts receivable…

A: Accounts receivable refers to the funds that the consumer owe to the company for the products and…

Q: When inventory items have price movements in excess of 50% (considered material), how does this…

A: As per AICPA, "Inherent risk is the risk of material misstatement assuming no related controls,…

Q: Which of the following substantive procedures would most likely help an auditor determine whether…

A: Substantive procedures are performed to detect the material misstatement or fraud at the assertion…

Audit Procedures

Audit Procedures are methods and techniques performed by the auditor to determine the quality of financial information of clients, thereby expressing an opinion on true & fair view of financial statements and entity position. They are identified and applied at the planning stage of audit after determining audit objectives, scope, approach, and risk assessment.