Auditors sometimes use ratios as audit evidence. For example, an unexplained DECREASE in the ratio ...
Auditors sometimes use ratios as audit evidence. For example, an unexplained DECREASE in the ratio
of gross profit to sales may
suggest which of the following possibilities?
a. Fictitious purchases.
b. Unrecorded purchases.
c. Fictitious sales.
d. Selling expense recorded as general
expense.
Homework Answers
|
Answer) option a Fictitious purchases Gross profit is difference of sales and cost of goods sold thus fictitious purchase will increase cost of goods sold and hence cost of goods sold. |
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Auditors sometimes use ratios as audit evidence. For example, an
unexplained DECREASE in the ratio
...
1. Auditors often follow a "cycle" approach to the gathering of evidence. Of the following accounts,...
1. Auditors often follow a "cycle" approach to the gathering of evidence. Of the following accounts, which typically would NOT be part of the sales cycle? a. Accounts receivable b. Allowance for doubtful accounts c. Inventory d. Sales returns and allowances e. None of the above 2. The assertion COMPLETENESS involves a. Overstatement. b. Ownership. c. Professional Skepticism. d. Understatement. 3. To be appropriate, evidence should be relevant and reliable. Under...
1. Consider the following statements: I. Lapping involves covering a theft related to accounts receivable...
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Auditors have a responsibility to remain alert to audit evidence that contradicts other audit evidence obtained. The app...
REMOVEDAuditors have a responsibility to remain alert to audit evidence that contradicts other audit evidence obtained. The application of professional skepticism is essential to the critical assessment and questioning of contradictory audit evidence. When the auditor obtains information during the course of the audit that contradicts information obtained from another source, the auditor has a responsibility to resolve the matter and consider its impact on the sufficiency and appropriateness of audit evidence obtained and the effect, if any, on other...
The auditors of SSC Company, a nonpublic company, are working on both audit objectives for the...
The auditors of SSC Company, a nonpublic company, are working on both audit objectives for the various accounts and documentation requirements. Parts (a) through d) of this question relate to objectives. The auditors have established the objectives listed below as a part of the audit. Substantive Procedures Obtain a trial balance of payables and reconcile with the accounts payable subsidiary ledger. Vouch sales from throughout the year. 8. Vouch purchases recorded after year-end. 4. Vouch sales recorded shortly before year-end....
Prepare ratio analyses (for the three year time period). You will compute the following ratios: Profitability...
Prepare ratio analyses (for the three
year time period). You will compute the following ratios:
Profitability ratios:
Gross Profit margin
Operating expense margin
Profit margin
Return on assets
Return on equity
Productivity ratios:
Accounts Receivable Turnover
Days Sales Outstanding
Inventory Turnover
Days inventory outstanding
Accounts Payable turnover
Days payable outstanding
Cash Conversion Cycle
PPE Turnover
Coverage ratios:
Total liabilities-to-equity
Total debt to equity
Cash from operations to total debt
Times interest earned
Liquidity ratios:
Current Ratio
Quick Ratio
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Simulation 5-46 (LO 5-1, 5-2,5-4) Auditors consider financial statement assertions to identify appropriate audit procedures. For...
Simulation 5-46 (LO 5-1, 5-2,5-4) Auditors consider financial statement assertions to identify appropriate audit procedures. For items a through f, match each assertion with the statement that most closely approximates its meaning. Each statement may be used only once. Statement Assertion a. Completeness b. Cutoff C. Existence and occurrence d. Presentation and disclosure e. Rights and obligations f. Valuation Auditors perform audit procedures to obtain audit evidence that will allow them to draw reasonable conclusions as to whether the client's...
When producing an audit report, auditors may face different circumstances which may mean a True and...
When producing an audit report, auditors may face different circumstances which may mean a True and Fair audit opinion is not appropriate. Required: Explain the potential effect on the final audit report of each of the following scenarios: (for outlining the effect on report and rationale. Three or four marks for each of the three scenarios to maximum of ten.) Audit tests on purchases indicate a weakness in the internal control system, with a potential overstatement of cost of sales...
Refer to the ratio analysis example (listed below) and update these ratios for Amazon, Sears, and...
Refer to the ratio analysis example (listed below) and update
these ratios for Amazon, Sears, and eBay based on their
2015, 2016, and 2017 annual reports. Review other
applicable areas of the annual report, such as the footnotes and
MD&A and tell us what the results mean in your own words. What
do you think could explain the changes?
Defining Ratio Analysis (Continued) You will use ratio analysis throughout the rest of the course. For now, consider the following basic...
6 Which financial leverage ratio is used with two other ratios to mathematically produce the return...
6 Which financial leverage ratio is used with two other ratios to mathematically produce the return on equity ratio? Debt/ Equity Total Liabilities/(Equity - Intangible Assets) Total Assets/ Equity Total Liabilities/Equity 17 Which of the following is a tertiary ratio that drives profitability? SG&A Expense/Sales Net Profit/Sales EBIT /Sales EBIT /Net Profit 18 Which ratios indicate how efficiently the company is in generating sales from the company's assets? Net profit ratio Solvency ratio Quick asset ratio Working capital turnover 19...
(Computing ratios) Use the information from the balance sheet and income statement in the popup window,...
(Computing ratios) Use the information from the balance sheet and income statement in the popup window, to calculate the following ratios: a. Current ratio b. Acid-test ratio c. Times interest earned d. Inventory turnover e. Total asset turnover f. Operating profit margin g. Days in receivables h. Operating return on assets i. Debt ratio j. Return on equity k. Fixed asset turnover a. The current ratio is X. (Round to two decimal places.) Cash Accounts receivable Inventory 99,000 31,000 50,000...
The auditors of SSC Company, a nonpublic company, are working on both audit objectives for the various accounts and documentation requirements. Parts (a) through d) of this question relate to objectives. The auditors have established the objectives listed below as a part of the audit. Substantive Procedures Obtain a trial balance of payables and reconcile with the accounts payable subsidiary ledger. Vouch sales from throughout the year. 8. Vouch purchases recorded after year-end. 4. Vouch sales recorded shortly before year-end....
Prepare ratio analyses (for the three
year time period). You will compute the following ratios:
Profitability ratios:
Gross Profit margin
Operating expense margin
Profit margin
Return on assets
Return on equity
Productivity ratios:
Accounts Receivable Turnover
Days Sales Outstanding
Inventory Turnover
Days inventory outstanding
Accounts Payable turnover
Days payable outstanding
Cash Conversion Cycle
PPE Turnover
Coverage ratios:
Total liabilities-to-equity
Total debt to equity
Cash from operations to total debt
Times interest earned
Liquidity ratios:
Current Ratio
Quick Ratio
We were...
Simulation 5-46 (LO 5-1, 5-2,5-4) Auditors consider financial statement assertions to identify appropriate audit procedures. For items a through f, match each assertion with the statement that most closely approximates its meaning. Each statement may be used only once. Statement Assertion a. Completeness b. Cutoff C. Existence and occurrence d. Presentation and disclosure e. Rights and obligations f. Valuation Auditors perform audit procedures to obtain audit evidence that will allow them to draw reasonable conclusions as to whether the client's...
Refer to the ratio analysis example (listed below) and update
these ratios for Amazon, Sears, and eBay based on their
2015, 2016, and 2017 annual reports. Review other
applicable areas of the annual report, such as the footnotes and
MD&A and tell us what the results mean in your own words. What
do you think could explain the changes?
Defining Ratio Analysis (Continued) You will use ratio analysis throughout the rest of the course. For now, consider the following basic...
6 Which financial leverage ratio is used with two other ratios to mathematically produce the return on equity ratio? Debt/ Equity Total Liabilities/(Equity - Intangible Assets) Total Assets/ Equity Total Liabilities/Equity 17 Which of the following is a tertiary ratio that drives profitability? SG&A Expense/Sales Net Profit/Sales EBIT /Sales EBIT /Net Profit 18 Which ratios indicate how efficiently the company is in generating sales from the company's assets? Net profit ratio Solvency ratio Quick asset ratio Working capital turnover 19...
(Computing ratios) Use the information from the balance sheet and income statement in the popup window, to calculate the following ratios: a. Current ratio b. Acid-test ratio c. Times interest earned d. Inventory turnover e. Total asset turnover f. Operating profit margin g. Days in receivables h. Operating return on assets i. Debt ratio j. Return on equity k. Fixed asset turnover a. The current ratio is X. (Round to two decimal places.) Cash Accounts receivable Inventory 99,000 31,000 50,000...
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