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ACC 491 Analytical Procedures and Control Risk Assessment in Auditing Week 4 Individual Assignments

An individual assignment in Contemporary Auditing focusing on analytical procedures and control risk assessments.

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Analytical Procedures and Control Risk Assessment in AuditingACC 491Week 4Individual Assignments From the Text8-16(Analytical procedures)In audit planning the audit of Circuits Technology, Inc. (CTI). CTI resells, installs, andprovides computer networking products (client software, gateway hardware and software, and twinax hardware) toother businesses. Figure 8-14 provides some summary information from CTI’s financial statements.Requireda. Calculate purchases, gross margin, inventory turn days, accounts receivable turn days, and accounts payable turndays for the years ended 20x2, 20x3, 20x4, 20x5.b. Describe the trends identified by performing analytical procedures in the gross operating cycle, the net operatingcycle, 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 misstatement in inventory?a.20x220x320x420x5Purchases2691-1025+1327=29932399-1327+1099=21712095-1099+1003=21611859-1003+1027=1871Gross Margin52.27 %48.11 %47.91 %52.39 %Inventory TurnDays(1025+1327)/2/2691/365=1176/7.37= 159.57(1327+1099)/2=1231/6.57 =187.37(1099+1003)/2=1051/5.74= 183.10(1003+1027)/2=1015/5.09= 199.41AR turn days70.2996.9294.5583.33AP Turn Days33.2344.6219.8927.73b.Trends for the year 20x5include an increase in inventory turn days, an increase in gross marginto the highest result for the four year time period, and an improved collection period.c.The auditor will have to turn tolerable misstatement into inventory turn days using the formula:π‘‡π‘œπ‘™π‘’π‘Ÿπ‘Žπ‘π‘™π‘’π‘šπ‘–π‘ π‘ π‘‘π‘Žπ‘‘π‘’π‘šπ‘’π‘›π‘‘πΆπ‘œπ‘ π‘‘π‘œπ‘“π‘”π‘œπ‘œπ‘‘π‘ π‘ π‘œπ‘™π‘‘β„βˆ—365=451859β„βˆ—365=7.84π‘‘π‘Žπ‘¦π‘ 

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Document Details

University
Grand Canyon University
Course
ACC 491
Subject
Accounting

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