Auditing: A Risk Based-Approach (MindTap Course List)
11th Edition
ISBN: 9781337619455
Author: Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher: Cengage Learning
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Textbook Question
Chapter 6, Problem 16RQSC
Indicate how the auditor could use substantive analytical procedures in resting the following accounts:
a. Interest expense related to bonds outstanding.
b. Natural gas expense for a public utility company.
c. Supplies expense for a factory.
d. Cost of goods sold for a fast-food franchisor (e.g., Wendy’s or McDonald’s). Note that cost of goods sold tends to average about 35% of sales in fast-food franchises.
e. Salary expense for an office (region) of a professional services firm.
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Students have asked these similar questions
Which of the following would not be considered an analytical procedure?
a. Projecting an error rate by comparing the results of a statistical sample with the actual population
characteristics.
b. Developing the expected current year sales based on the sales trend of the prior five years.
O c. Computing accounts receivable turnover by dividing credit sales by the average net receivables.
d. Estimating payroll expense by multiplying the number of employees by the average hourly wage rate and the
total hours worked.
The descriptive sections of the annual report that provides insight into what the company does and the types of risks it lates is felt
Select one:
OA management discussion and analysis.
B. the industry overview.
OC. the audit opinion.
D. notes to the financial statements.
To best interpret the accounts receivable turnover ratio, the days in accounts receivable should be compared to the company's
Select one:
A sales revenue.
B. credit terms.
OC. inventory turnover.
D. accounts receivable balance.
Two companies have an identical amount of current assets and current liabilities Donald Inc. has 40% of its current assets invested in
whereas Mickey Corp. has 30% of its current assets invested in inventory Which of the following statements is true?
Select one:
OA. Donald will have the higher quick ratio.
OB. Donald will have the higher current ratio.
OC. The companies are equally liquid because their current ratios are the same
OD. Donald is less liquid than Mick
a. What do the accounting policies say in the annual report (footnotes) regarding the cost of revenue? What are the drivers to the cost of revenue and the trends?
b. Are there any trends in sales and marketing expenses or research and development? Are these amounts reasonable for the type of business?
c. Compare general and administrative expenses to similar companies. Are they reasonable?
d. What is the ratio of net interest income (expense) to income from operations? Is this a safe ratio for the company? Why or why not?
Chapter 6 Solutions
Auditing: A Risk Based-Approach (MindTap Course List)
Ch. 6 - Prob. 1CYBKCh. 6 - Prob. 2CYBKCh. 6 - Prob. 3CYBKCh. 6 - Which of the following statements is true...Ch. 6 - Prob. 5CYBKCh. 6 - Prob. 6CYBKCh. 6 - Prob. 7CYBKCh. 6 - Prob. 8CYBKCh. 6 - Prob. 9CYBKCh. 6 - Prob. 10CYBK
Ch. 6 - Prob. 11CYBKCh. 6 - Prob. 12CYBKCh. 6 - Prob. 13CYBKCh. 6 - Prob. 14CYBKCh. 6 - Prob. 15CYBKCh. 6 - Prob. 16CYBKCh. 6 - Prob. 17CYBKCh. 6 - Prob. 18CYBKCh. 6 - Prob. 19CYBKCh. 6 - Prob. 20CYBKCh. 6 - Prob. 1RQSCCh. 6 - Prob. 2RQSCCh. 6 - Prob. 3RQSCCh. 6 - Prob. 4RQSCCh. 6 - Refer to Exhibit 6.2 and describe the differences...Ch. 6 - Prob. 6RQSCCh. 6 - Prob. 7RQSCCh. 6 - Prob. 8RQSCCh. 6 - Prob. 10RQSCCh. 6 - Prob. 11RQSCCh. 6 - Prob. 12RQSCCh. 6 - Prob. 13RQSCCh. 6 - Prob. 14RQSCCh. 6 - Prob. 15RQSCCh. 6 - Indicate how the auditor could use substantive...Ch. 6 - Prob. 17RQSCCh. 6 - Prob. 18RQSCCh. 6 - Prob. 19RQSCCh. 6 - Prob. 20RQSCCh. 6 - Prob. 21RQSCCh. 6 - Prob. 22RQSCCh. 6 - Prob. 23RQSCCh. 6 - Prob. 24RQSCCh. 6 - Prob. 25RQSCCh. 6 - Prob. 26RQSCCh. 6 - Prob. 27RQSCCh. 6 - Prob. 28RQSCCh. 6 - Prob. 29FFCh. 6 - Prob. 30FFCh. 6 - Prob. 31FFCh. 6 - Prob. 32FFCh. 6 - Prob. 33FFCh. 6 - MINISCRIBE (LO 1, 2) As reported in the Wall...
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