Auditing & Assurance Services: A Systematic Approach (Irwin Accounting)
10th Edition
ISBN: 9780077732509
Author: William F Messier Jr, Steven M. Glover Associate Professor, Douglas F. Prawitt Associate Professor
Publisher: McGraw-Hill Education
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Question
Chapter 8, Problem 8.15MCQ
To determine
Introduction:
Tolerable Deviation Rate is defined as the maximum rate of acceptability of misstatement. It is the maximum possible variance accepted in audit sampling in order to rely upon a specific control.
Upper Deviation Rate is defined as sample deviation rate and an appropriate allowance for sampling risks.If the upper deviation limit is less than or equal to the tolerable rate, the sample results support reliance on the control procedures tested.
In this case, tolerable deviation rate i.e., 7% which is lower than upper deviation rate of 8% which clearly shows controls is ineffective. Auditor cannot rely on the entity’s internal controls.
To describe: Relationship between tolerable rate and upper deviation rate.
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Anti-Pandemic Pharma Co. Ltd. reports the following information inits income statement:Sales = $5,250,000;Costs = $2, 173,000;Other expenses = $187,400;Depreciation expense = $79,000;Interest expense= $53,555;Taxes = $76,000;Dividends = $69,000.$136,700 worth of new shares were also issued during the year andlong-term debt worth $65,300 was redeemed.a) Compute the cash flow from assetsb) Compute the net change in working capital
Question 3
Footfall Manufacturing Ltd. reports the following financial
information at the end of the current year:
Net Sales
$100,000
Debtor's turnover ratio (based on 2
net sales)
Inventory turnover ratio
1.25
Fixed assets turnover ratio
0.8
Debt to assets ratio
0.6
Net profit margin
5%
Gross profit margin
25%
Return on investment
2%
Use the given information to fill out the templates for income
statement and balance sheet given below:
Income Statement of Footfall Manufacturing Ltd. for the year ending
December 31, 20XX
(in $)
Sales
100,000
Cost of goods
sold
Gross profit
Other expenses
Earnings
before
tax
Tax @50%
Earnings
after
tax
Balance Sheet of Footfall Manufacturing Ltd. as at December 31, 20XX
(in $)
Liabilities
Amount
Assets
Amount
Equity
Net fixed assets
Long term 50,000
Inventory
debt
Short term
debt
Debtors
Cash
TOTAL
TOTAL
Chapter 8 Solutions
Auditing & Assurance Services: A Systematic Approach (Irwin Accounting)
Ch. 8 - Prob. 8.1RQCh. 8 - Prob. 8.2RQCh. 8 - Prob. 8.3RQCh. 8 - Prob. 8.4RQCh. 8 - Prob. 8.5RQCh. 8 - Prob. 8.6RQCh. 8 - Prob. 8.7RQCh. 8 - Prob. 8.8RQCh. 8 - Prob. 8.9RQCh. 8 - Prob. 8.10RQ
Ch. 8 - Prob. 8.11MCQCh. 8 - Prob. 8.12MCQCh. 8 - Prob. 8.13MCQCh. 8 - Prob. 8.14MCQCh. 8 - Prob. 8.15MCQCh. 8 - Prob. 8.16MCQCh. 8 - Prob. 8.17MCQCh. 8 - Prob. 8.18MCQCh. 8 - Prob. 8.19MCQCh. 8 - Prob. 8.20MCQCh. 8 - Prob. 8.21PCh. 8 - Prob. 8.22PCh. 8 - Prob. 8.23PCh. 8 - Prob. 8.24PCh. 8 - Prob. 8.25PCh. 8 - Prob. 8.26PCh. 8 - Prob. 8.27PCh. 8 - Prob. 8.28PCh. 8 - Prob. 8.29PCh. 8 - Prob. 8.30PCh. 8 - Prob. 8.31P
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