8-16 Analytical Procedures Boynton, William C., & XXXXX, XXXXX N. (2006). Modern Auditing:Assurance Services and the Integrity of Financial Reporting (8th ed.). Hoboken, NJ: Wiley. Required Calculate purchases, gross margin, inventory turn days, accounts receivable turn days, and accounts payable turn days for the years ended 20x2, 20x3, 20x4, 20x5.
Thie is what I have for quest 1
COGS 2691-1025+1327=2993 purchase for 2002
COGS 2399-1327-1099=2171 purchase for 2003
COGS 2095+-1099-1003=2,161 purchase for 2004
COGS 1859+1003- 1027=1,871 purchase for 2005
Inventory Turnover days
Account Receivable turnover days
Accounts Payable Turnover
Describe the trends identified by performing analytical procedures in the gross operating cycle, the net operating cycle, and gross margin If tolerable misstatement is $45,000 for inventory, develop an expectation range for inventory turn days. With respect to inventory, what might these trends indicate about the potential misstatement in inventory?
Bradley sent me a copy of his test of controls work that he did on sales transactions. (Please tell him to send his work to you, rather than me.) Based on what Bradley found, there looks to be some serious problems in Sales and A/R. You need to write a memo identifying and explaining the significance of the qualitative features indicated by these deviations. Some things you may want to think about:
Because of the problems noted, I don't think we can rely on Apollo's controls over revenue and accounts receivable. We will need to confirm most, if not all, of the accounts receivable balances. I suggest that you mail positive confirmations to those customers with accounts greater than $1,000,000 and negative confirmations to those with balances less than $1,000,000.
Also, I suggest that you ask Apollo's customers to verify total sales during the year. Normally, you wouldn't do this because it is difficult for the customers to confirm a year's worth of transactions. However, since there is a relatively small amount of sales transactions during the year, they should be able to confirm without a problem. I'll talk to you about it more later. I don't think you need to worry about customers with current zero balances.
For now, just write the memo to be placed in the accounts receivable workpapers (C-series) about the problems that Bradley found and their affect on our audit procedures (more extensive testing, positive confirmations, etc.).
This memo is part of the Apollo shoes case. Thanks