Comprehensive Questions: Analytical procedures


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    8-16(Analytical procedures) In audit planning the audit of Circuits Technology, Inc. (CTI). CTI resells, installs, and provides computer networking products (client software, gateway

    hardware and software, and twinax hardware) to other businesses. Figure 8-14 provides

    some summary information from CTI’s financial statements.

    Figure 8-14 CTI Selected Financial Information ($000)

    20×1

    20×2

    20×3

    20×4

    20×5

    Accounts receivable, net

    Inventory

    Accounts  payable

    $ 837

    1,025

    $ 164

    $ 1,335

    $ 1,327

    $   380

    $ 1,121

    $ 1,099

    $    225

    $    962

    $ 1,003

    $    201

    $    822

    $ 1,027

    $    175

    Sales

    Cost of sales

       Gross margin

    $ 3,780

    $1,812

    $1,968

    $ 5,638

    $ 2,691

    $ 2,947

    $ 4,623

    $2,399

    $ 2,224

    $ 4,022

    $ 2,095

    $ 1,927

    $ 3,905

    $ 1,859

    $ 2,046

    8-16 Part a CTI Selected Financial Information ($000)

    a. Calculate purchases, gross margin, inventory turn days, accounts receivable turn days,

    and accounts payable turn days for the years ended 20×2, 20×3, 20×4, 20×5.

    b. Describe the trends identified by performing analytical procedures in the gross operating

    cycle, the net operating cycle, and gross margin.

    c. If tolerable misstatement is $45,000 for inventory, develop an expectation range for inventory turn days.

    d. With respect to inventory, what might these trends indicate about the potential mis misstatement in inventory?

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